ANNEX A
SETTLEMENT AGREEMENT
AND
ASSET PURCHASE
AGREEMENT
This
Settlement Agreement and Asset Purchase Agreement (the “Agreement”) dated as of
September 30, 2008, among Diversified Product Inspections, LLC, a Tennessee
limited liability company (the “Buyer”), Diversified Product Inspections, Inc.,
a Florida corporation (the “Seller”), John Van Zyll, Ann Furlong, and Marvin
Stacy (collectively, the “Management”) and Sofcon, Limited, a Belize
corporation, EIG Venture Capital, Limited, a Belize corporation, and EIG Capital
Investments, Limited, a Belize corporation (collectively, the “Plaintiffs”). The
Buyer, the Seller, the Management and the Plaintiffs are referred to
collectively as the “Parties” and each is individually referred to as a
“Party.”
RECITIALS
WHEREAS,
the Plaintiffs, holders of shares of stock in the Seller, instituted the Pending
Litigation (as defined) against the Seller and the Management, alleging certain
violations of the 1934 Securities Exchange Act, violations of the Securities Act
of 1933, violations of the Sarbanes-Oxley Act of 2002, fraud, breach of
fiduciary duty, negligent misrepresentation, and breach of statutory duties as
directors; and
WHEREAS,
the Seller and the Management filed a response to the Complaint filed in the
Pending Litigation contesting the claims of the Plaintiffs; and
WHEREAS,
the Parties desire to settle the Pending Litigation by having (a) the Seller (i)
transfer substantially all of the Acquired Assets (as defined) to the Buyer
along with the Buyer’s assumption of the Assumed Liabilities (as defined), and
(ii) distribute $250,000 to one of the Plaintiffs and (b) the Management (i)
sell the Purchased Management Stock (as defined) to the Plaintiffs, (ii) assign
and transfer all of their respective shares of the Seller’s common stock (other
than the Purchased Management Stock) to the Seller for immediate cancellation,
and (iii) assign and transfer all of their options to acquire shares of the
Seller’s common stock to the Seller for immediate cancellation.
NOW,
THEREFORE, consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties and covenants in this
Agreement, the Parties agree, concurrently with the consummation of the
Conditions Precedent to Close (as defined), as follows:
A.
The Buyer will purchase all of the Acquired Assets (as defined) and, as
consideration for the Acquired Assets, will assume and discharge all of the
Assumed Liabilities (as defined) and all other Liabilities and all obligations
of the Seller as set forth in Section 2(c).
B.
The Management will (i) assign and transfer all of their respective shares of
the Seller’s common stock (other than the Purchased Management Stock) to the
Seller for immediate cancellation as set forth in Section 2(c), and (ii) sell
the Purchased Management Stock to the Plaintiffs for Three Hundred ($300)
Dollars.
C.
The Management will assign and transfer all of their rights and options to
acquire shares of the Seller’s common stock to the Seller for immediate
cancellation as set forth in Section 2(c).
D.
The Seller will make a payment in the amount of $250,000 to EIG Venture Capital,
Limited (which will be made out of the Seller funds available on the Closing
Date (as defined) that are not included in the Acquired Assets).
E.
The Management will provide evidence to the Plaintiffs that the California
Litigation (as defined) has been settled and dismissed with no further liability
or obligation on the Seller as set forth in Section 2(e).
F.
All Indebtedness (as defined) and Liabilities of the Seller (including, but not
limited to, all of the Liabilities listed on the Seller’s financial statements,
including, all Liabilities and obligations owing by the Seller on its long term
debt, capital lease obligations, Mortgage (as defined), line of credit, and
notes payable) shall have either been satisfied, discharged and paid-in-full or
assigned to the Buyer with releases in favor of the Seller.
G.
All Liens (as defined), UCC-1 Financing Statements, Mortgages, security
interests, and other encumbrances on the Seller’s assets and real property shall
have either been discharged and paid-in-full or assigned to the Buyer with
releases in favor of the Seller.
H.
The Buyer will hire all employees of the Seller and assume and pay all amounts
owing by the Seller to its former employees (including, but not limited to, all
wages, bonuses, performance incentives and rights to receive monies or other
remuneration from the Seller).
I.
The Management will tender their written resignations as officers and directors
of the Seller as set forth in Section 2(f)(i) and cause the Seller’s Board of
Directors to remove all other existing officers and Directors and appoint Jan
Telander as the Seller’s sole officer and Director.
J.
The Management will provide evidence to the Seller and the Plaintiffs that the
Seller’s 2001 Employee/Consultant Stock Compensation Plan (and all similar
plans) has been terminated and all previously granted rights thereunder (except
for any as may be approved by Plaintiffs) shall have been terminated as set
forth in Section 2(f)(iii).
K.
The Buyer will pay-in-full all accrued and anticipated Seller obligations for
periods up to and including the Closing Date that may become due and owing after
the Closing Date, including, but not limited to, all Closing Date Outstanding
Checks (as defined) and all amounts that may become due and owing for federal,
state and local Taxes, real property transfer and real property state and local
taxes, and amounts owing by the Seller for the preparation of financial
statements and SEC filings and miscellaneous legal and other fees, including all
amounts owing to the Seller’s legal counsel, Hatfield & Temple, P.C. and
Harris Cramer LLP relating to the documentation of this Agreement and the
settlement of the Pending Litigation and the California Litigation and all
amounts owing to the Seller’s Transfer Agent, Interwest Transfer Co., Inc. and
all amounts owing to the Seller’s audit and accounting firm Coulter &
Justus, P.C. and all other service providers to the Seller (e.g., all legal,
accounting, audit, Transfer Agent and related costs, fees and expenses of the
Seller).
1.
Definitions.
“Acquired
Assets” means all of the right, title, and interest that the Seller possesses
and has the right to transfer in and to all of its assets (other than the
Excluded Assets described herein), provided, however, that the Acquired Assets
shall
not
include (i) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller as a corporation,
(ii) $250,000 that will be paid by the Seller to EIG Venture Capital, Limited on
the Closing Date, (iii) any rights of the Seller to continue operating as a
fully reporting Over-the-Counter Bulletin Board company following the Closing,
and (iv) any of the rights of the Seller under this Agreement. The Acquired
Assets shall include the Real Property owned by the Seller located at 1059 East
Tri County Blvd., Oliver Springs, Tennessee which Real Property will be conveyed
to the Buyer concurrently with the discharge of the existing Deeds of Trust and
the concurrent release of the Seller from all liabilities and obligations owing
to AmSouth Bank or its successor(s) that are secured by the Deeds of Trust or
the assignment to and assumption by the Buyer on the Closing Date of the Deeds
of Trust and all obligations that are secured by the Deeds of Trust and the
concurrent release of the Seller from all liabilities and obligations owing to
AmSouth Bank or its successor(s) that are secured by the Deeds of
Trust.
“Ancillary
Agreements” means all of the agreements referenced herein that are to be
executed and delivered in connection with the consummation of the transactions
described in this Agreement.
“Assumed
Liabilities” means all Liabilities and obligations of the Seller whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including, but not limited to all Tax Liabilities and the
Mortgage on the Real Property.
“Basis”
means any known past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that forms or could form a reasonable basis for
any specified consequence.
“Buyer”
has the meaning set forth in the preface above.
“California
Litigation” means Donald E. Savard Co., a California corporation vs. Diversified
Products Inspections, Inc., a Florida corporation, pending in the Superior Court
of the State of California, County of Los Angeles, Northeast District; Case No.
GC037355.
“Closing”
has the meaning set forth in Section 2(g) below.
“Closing
Date” shall mean the date upon which all conditions to closing the transaction
have been complied with or waived and the Parties deliver all of the funds and
documents required to be delivered by this Agreement.
“Closing
Date Outstanding Checks” means all outstanding checks and other negotiable
instruments signed or issued by the Seller on or before the close of business on
the Closing Date.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Conditions
Precedent to Close” means the approval of the transactions described in this
Agreement by the Seller’s stockholders and the satisfaction of the additional
conditions outlined in Section 6 of this Agreement.
“Confidential
Information” means any information concerning the businesses and affairs of the
Seller that is not already generally available to the public.
“Deeds of
Trust” means and refers collectively to (a) the Deed of Trust from the Seller to
FMLS, Inc., Trustee for AmSouth Bank, in the original amount of $800,000, dated
December 21, 2004, and recorded in Book 1381, page 1788, in the Anderson County
Register’s Office, and (b) the Deed of Trust from the Seller to FMLS, Inc.,
Trustee for AmSouth Bank, in the original amount of $400,000, dated June 29,
2006, and recorded in Book 1428, page 918, in the Anderson County Register’s
Office.
“Environmental,
Health, and Safety Requirements” shall mean all federal, state, local and
foreign statutes, regulations, and ordinances concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, as such requirements are enacted and in effect on or prior to the
Closing Date.
“Environmental
Law” means any and all Legal Rules pertaining to land use (excluding Legal Rules
regarding zoning and building code restrictions), air, soil, surface water,
ground-water (including the protection, cleanup, removal, remediation or damage
thereof), public or employee health or safety, industrial hygiene, environmental
conditions, protection of the environment or any other environmental matter,
including, without limitation, the following laws as the same have been or may
be amended from time to time: (a) Clean Air Act (42 U.S. 7401,
et seq.
); (b) Clean
Water Act (33 U.S.C. 1251,
et seq.
); (c)
Resource Conservation and Recovery Act (42 U.S.C. 6901,
et seq.
); (d)
Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”)
(42 U.S.C. 9601,
et
seq.
); (e) Safe Drinking Water Act (42 U.S.C. 300f,
et seq.
); (vi) Toxic
Substances Control Act (15 U.S.C. 2601,
et seq.
); (f) Rivers
and Harbors Act (33 U.S.C. 401,
et seq.
); (g)
Occupational Safety and Health Act (29 U.S.C. 651,
et seq.
); Part 201,
et seq.
of
Michigan Natural Resources and Environmental Protection Act, Act 451 of 1994, as
amended, together with all other Legal Rules relating to emissions, discharges,
releases or threatened releases of any hazardous substance into ambient air,
land, surface water, ground-water, personal property or structures, or otherwise
relating to the presence, manufacture, processing, distribution, use, treatment,
storage, disposal, transport, discharge, labeling, testing, warning, monitoring
or handling of any hazardous substance.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
validly issued regulations thereunder.
“Excluded
Assets” has the meaning set forth in Section 2(a)(i).
“Financial
Statement” has the meaning set forth in Section 3(j) below.
“GAAP”
means United States generally accepted accounting principles as in effect from
time to time.
“Governmental
Entity” means any United States, foreign, international or multinational
government and any state or local or other political subdivision thereof or any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any
department, commission, board, agency, bureau, official or other regulatory,
administrative or judicial authority.
“Income
Tax” means any federal, state, local, or foreign tax based on or measured by
reference to net income, including any interest, penalty, or addition thereto,
whether disputed or not.
“Indebtedness”
of the Seller means (without duplication) (a) any Liability of the Seller (i) in
respect of borrowed money, (ii) evidenced by bonds, debentures, notes or other
similar instruments, (iii) representing the deferred purchase price of property
or services, (iv) created or arising under any conditional sale or other title
retention agreement with respect to property acquired by the Seller, (v) as
lessee under capitalized leases, (vi) under bankers' acceptance and letter of
credit facilities, (vii) to purchase, redeem, retire, decease or otherwise
acquire for value any capital stock of the Seller, or (viii) in respect of
hedging obligations; (b) all Indebtedness of others that is either (i)
guaranteed by the Seller or (ii) secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and contract
rights) owned by the Seller, even though the Seller has not assumed or become
liable for the payment of such Indebtedness; and (c) all interest costs,
expenses and fees related to any of the foregoing.
“Intellectual
Property” means (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, trade names,
brand names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registration, and renewals in connection
therewith; (c) all copyrightable works, all works of authorship, all copyrights,
and all applications, registrations and renewals in connection therewith; (d)
all trade secrets and confidential business information, customer and supplier
lists, pricing and cost information, business and marketing plans and proposals,
ideas, research and development, know-how, discoveries, concepts, formulas,
compositions, manufacturing and production processes, techniques, methods and
procedures and all other processes, techniques, methods and procedures,
technical data, operating and maintenance manuals, designs, drawings and
specifications; (e) all computer software (including assemblers, applets,
compilers, source code and object code, user interfaces and databases and
related documentation) and information systems and programs (including data and
related documentation), internet websites, URLs and domain names, whether owned
or leased; (f) all other proprietary rights; and (g) all copies and tangible
embodiments of the items described in clauses (a) through (f) in whatever form
or medium.
“Knowledge”
means, when used in reference to the Seller or the Management, that any member
of the Management or any of the Seller’s senior management team or officer or
director of the Seller is actually aware of the fact or other matter to which
the term “Knowledge” relates, or with respect to such matters for which such
individual has responsibility within the scope of his or her employment by the
Seller, would have become aware of the fact or other matter to which the term
Knowledge relates had they made reasonable inquiry to verify the accuracy of
such matter.
“Legal
Rules” means all laws, codes, statutes, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations of all
Governmental Entities (including the SEC and all entities with authority over
publicly traded entities in the United States) with jurisdiction.
“Liability”
and “Liabilities” means any liability, obligation or commitment of any nature
whatsoever (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, whether secured or unsecured, and whether due or to become due),
including, without limitation, any Indebtedness, any guaranty of Indebtedness or
obligations of any other Person, any liability for Taxes (including any
interest, penalty, or addition thereto), any liability with respect to any
Employee Pension Benefit Plan which is subject to Section 412 of the Code and
any withdrawal liability under Section 4201 of ERISA, as such liability may be
set forth in a notice of withdrawal liability under Section 4219 of ERISA (and
as adjusted from time to time subsequent to the date of such
notice).
“Liens”
means all liens, mortgages, pledges, encumbrances, Security Interests, claims,
options, purchase agreements, security agreements and interests, commission
arrangements, title retention agreements, deeds of trust, hypothecations, rights
of first refusal or offer, occupancy rights, encroachments, easements, rights of
way, charges, covenants, restrictions and adverse claims or interests of any
kind or nature whatsoever.
“Litigation”
has the meaning set forth in Section 3(p) below.
“Material
Adverse Effect” means a material adverse effect on the business, property,
liabilities, financial condition, or results of operations of the Seller,
including any event that may reasonably cause the delisting of trading of the
Seller’s common stock on the Over-the-Counter Bulletin Board, and any Securities
and Exchange Commission investigation relating to the Seller.
“Mortgage”
means the mortgage on the Real Property that will be discharged on the Closing
Date and either assumed by the Buyer or replaced with a new mortgage in the name
of the Buyer that encumbers the Real Property after it is conveyed to the
Buyer.
“Ordinary
Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and
frequency).
“Party”
and “Parties” has the meaning set forth in the introductory paragraph to this
Agreement.
“Pending
Litigation” means
Sofcon,
Ltd., a Belize corporation; EIG Venture Capital, Limited, a Belize corporation
and EIG Capital Investments, Limited, a Belize corporation vs. Diversified
Product Inspections, Inc., a Florida corporation; John Van Zyll, Ann Furlong and
Marvin Stacy
, pending in the Circuit Court of the Fifteenth Judicial
Circuit in and for Palm Beach County, Florida; Case No. 59 2006 CA 009205
XXXXMBAB.
“Person”
means an individual, a sole proprietorship, a partnership, a corporation, a
limited liability company, a limited liability partnership, an association, an
institution, a joint stock company, a trust, a joint venture, an unincorporated
organization, other entity or a Governmental Entity.
“Proxy”
means the proxy, proxy statement, notice of meeting and any other soliciting
material (in a form to be reviewed and approved by the Plaintiffs and their
legal counsel) to be filed with the SEC and mailed to all of the Seller’s
shareholders describing and seeking approval of the transactions described in
this Agreement.
“Purchased
Management Stock” means the 3,000,000 shares of the Seller’s common stock that
is owned by the Management that will be sold to the Plaintiffs for Three Hundred
Dollars ($300) on the Closing Date.
“Purchase
Price” has the meaning set forth in Section 2(c) below.
“Real
Property” means the real property that is owned by the Seller located at 1059
East Tri-County Blvd., Oliver Springs, Tennessee that includes an approximately
45,000 square foot facility that the Seller uses as its corporate headquarters
and as its warehouse.
“SEC”
means the Securities and Exchange Commission.
“Security
Interest” means any mortgage, pledge, lien, encumbrance, charge, or other
security interest, other than (a) mechanic's, materialmen’s, and similar liens,
(b) liens for taxes not yet due and payable, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
“Seller”
has the meaning set forth in the preface above.
“Taxes”
(and, individually, “Tax”) means (i) any income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Code Section 59A), customs,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, property (real, personal or intangible), sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty, or addition
thereto imposed by any Governmental Entity and (ii) any Liability for the
payment of any amount described in clause (i) as the result of being a member of
an affiliated, consolidated, combined, unitary or aggregate group, (iii) any
liability for the payment of any amounts as a result of an express or implied
obligation to indemnify any other Person with respect to the payment of any
amounts of the type described in clauses (i) or (ii), and (iv) any liability for
the payment of any amounts as a result of transferee or successor liability with
respect to the payment of any amounts of the type described in clauses (i), (ii)
or (iii).
“Taxing
Authority” means any United States, federal, state or local governmental or
quasi-governmental authority or entity or any foreign governmental or
quasi-governmental authority or entity that is authorized to levy and/or collect
Taxes.
“Tax
Liabilities” means (1) all Liabilities of the Seller for unpaid Taxes with
respect to periods beginning prior to the Closing and ending prior to or on the
Closing, (2) all Liabilities of the Seller for unpaid Taxes attributable to
periods beginning prior to the Closing and ending after the Closing, (3) all
Liabilities of the Seller for Taxes resulting (directly or indirectly) from
transactions and events that occurred in a period beginning prior to Closing,
(4) all Liabilities of the Seller for transfer, sales, use, real property, and
Income Taxes arising (directly or indirectly) in connection with the
consummation of the transactions contemplated under this Agreement, and (5) all
Liabilities of the Seller for unpaid Taxes of Persons other than the Seller
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract or
otherwise.
“Tax
Return” means any return, declaration, estimate, report, claim for refund, or
information return or statement relating to the determination, assessment,
collection or administration of any Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
“Transfer
Agent” means Interwest Transfer Co., Inc. and any other transfer agent engaged
by the Seller.
“Treasury
Regulations” means the regulations, including temporary regulations, promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
2.
Basic Transaction.
Concurrently with the consummation of the Conditions Precedent to Close, the
Parties shall consummate or cause the consummation of the following
actions:
(a)
Purchase and
Sale of Acquired Assets
. The Buyer agrees to purchase from the Seller,
and the Seller shall sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 2. The Acquired Assets will be conveyed to the Buyer on the Closing Date
pursuant to a Bill of Sale in the form attached hereto as
Exhibit
A
.
(i)
Excluded
Assets
.
The
Parties acknowledge and agree that the Acquired Assets shall exclude cash in the
amount of Two Hundred and Fifty Thousand ($250,000) Dollars which will be paid
by the Seller to EIG Venture Capital, Limited, a Belize corporation on the
Closing Date.
(b)
Assumption and
Discharge of all Indebtedness, Liabilities and obligations of the Seller;
Release of Encumbrances and Mortgage; Retention of Seller’s Employees
.
The Buyer agrees to assume and become responsible for and pay and discharge all
of the Seller’s Indebtedness, Assumed Liabilities and obligations at the Closing
(and, where applicable, with respect to the Assumed Liabilities, after the
Closing to the extent that any of the Assumed Liabilities becomes known,
quantifiable and/or due and owing after the Closing Date). The Assumed
Liabilities will be assigned by the Buyer’s execution of an Assumption Agreement
on the Closing Date in the form attached hereto as
Exhibit
B
. In connection with the foregoing, at the Closing, the Buyer and the
Management will provide evidence of the following to the Plaintiffs and the
Seller at the Closing:
(i)
evidence that all Indebtedness of the Seller (including, but not limited
to, all of the Liabilities listed on the Seller’s financial statements,
including, all Liabilities and obligations owing by the Seller on its long term
debt, capital lease obligations, Mortgage, Line of Credit, and all notes
payable) shall have either been satisfied, discharged and paid-in-full and/or
assigned to Buyer with releases in favor of the Seller;
(ii)
evidence that all Liens, UCC-1 Financing Statements, Mortgages
encumbering the Real Property, security interests, and other encumbrances on the
Seller’s assets, including all personal property and real property shall have
been discharged and paid in full or assigned to Buyer with releases in favor of
the Seller; and
(iii)
evidence that the Buyer has hired all employees of the Seller and shall
have assumed and paid all amounts owing or on behalf of the Seller to its former
employees (including, but not limited to, all wages, bonuses, performance
incentives and rights to receive monies or other remuneration from the Seller
and all withholding amounts and employment and other Tax contributions shall
have been withheld and paid to the appropriate Governmental Entity as of the
Closing Date).
(c)
Purchase Price;
Assumption of Assumed Liabilities; Assignment and Cancellation of Common Stock
and Options Owned by Management
. On the Closing Date, (1) the Buyer
shall discharge in full all of the Assumed Liabilities set forth in
Schedule 2(c)
and the
Mortgage, (2) the Management shall assign and transfer to the Seller for
immediate cancellation all of their respective shares of the Seller’s common
stock and all of their options and rights to acquire shares of the Seller’s
common stock except for the Purchased Management Stock that the Management will
sell to the Plaintiffs for Three Hundred Dollars ($300) on the Closing Date. In
connection with the foregoing, on the Closing Date, the Management will provide
the following to the Plaintiffs and the Seller:
(i)
a stockholder ledger and a stock option and stock rights ledger (as of
the close of business on the prior trading day that lists the names and number
of shares held by each of the Seller’s stockholders of record and a ledger of
all option or right to acquire any of Seller’s shares that have been granted to
any Person or entity (and which will also include a reference to the Purchased
Management Stock), a copy of which shall be attached hereto as
Schedule
2(c)(i)
.
(ii)
a Management stockholder ledger that lists the number of shares and
option to purchase shares of the Seller’s common stock held by each of the
individual members of Management on the Closing Date, a copy of which shall be
attached hereto as
Schedule
2(c)(ii)
.
(iii)
assignment documents in a form acceptable to legal counsel for the
Plaintiffs pursuant to which
each
of the members of the
Management will (a) sell One Million (1,000,000) shares of the Seller’s common
stock that they own to the Plaintiffs for One Hundred Dollars ($100), and (b)
assign and transfer to the Seller for immediate cancellation, all of their other
shares of common stock and all of their respective options to purchase shares of
common stock in the Seller. These assignment documents will be in the forms
attached hereto as
Exhibits
C-1 – C-6
.
(iv)
stock certificates issued to each of the Plaintiffs for 1,000,000 shares
of the Seller’s common stock.
(d)
Settlement
Payment
: On the Closing Date, the Seller will make a payment in the
amount of $250,000 to EIG Venture Capital, Limited (which will be made out of
the Seller funds available on the Closing Date that are not included in the
Acquired Assets).
(e)
Dismissal of
California Litigation and Pending Litigation
. On the Closing Date, (a)
the Management shall provide evidence to the Plaintiffs that the California
Litigation has been settled and dismissed with no further liability or
obligation on the Seller, and (b) the Plaintiffs shall dismiss the Pending
Litigation.
(f)
Management
Resignations; Termination of Stock Compensation Plans
. On the Closing
Date, the Management will provide the following to the Plaintiffs and the
Seller:
(i)
written resignations of each individual who is a member of Management or
an officer or director of the Seller from their positions as Officers and
Directors of the Seller in the forms attached hereto as
Exhibits
D-1 – D-5
;
(ii)
appropriate (pre-Closing) resolutions of the Management removing all of
the Seller’s officers and Directors and appointing Jan Telander as the
President, Treasurer and Secretary and sole director of the Seller effective
concurrently with the resignation of the Management on the Closing Date in the
form attached hereto as
Exhibit
E
;
(iii)
evidence that the Seller’s 2001 Employee/Consultant Stock Compensation
Plan and all similar plans has/have been terminated and all previously granted
rights there under shall have been terminated; and
(iv)
evidence that all options, warrants and similar rights that any person
and/or entity may have to acquire any common stock or equity ownership interest
in the Seller shall have been terminated and on the Closing Date, no such
options, warrants or similar rights exist.
(g)
The
Closing
. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place at a location mutually agreed upon by the
Parties, or by facsimile and overnight courier, commencing at 10:00 a.m. New
York time, as promptly as practicable after the execution of this Agreement and
the satisfaction of the Conditions Precedent to Close on the specific Closing
Date agreed to by the Parties.
(h)
Deliveries at
the Closing
. At the Closing, (i) the Seller will deliver to the
Plaintiffs the various consideration, certificates, instruments, and documents
referred to in Section 6(a) below including the payment of $250,000 to EIG
Venture Capital, Limited and a general release in the form attached as
Exhibit
F
; (ii) the Plaintiffs will deliver to the Seller and the Management the
various certificates, instruments and documents referred to in Section 6(b)
below including a general release in the form attached as
Exhibit
G
; (iii) the Buyer will duly execute and deliver to the Seller (A) an
assumption in the form attached as
Exhibit
B
and (B) such other instruments of assumption as the Plaintiffs and
their counsel may request; and (iv) the Management will deliver to the
Plaintiffs (A) a general release in the form attached as
Exhibit
H
and all of the items that are described in Sections 2(b)(i) – (iii);
2(c)(i) – (iv); 2(d); and 2(e)(i) – (iv) herein above, and (B) assignment
documents evidencing the sale and transfer of the Purchased Management Stock to
the Plaintiffs effective as of the Closing Date.
3.
Representations and Warranties of the
Seller and Management.
The
Seller and the Management, jointly and severally, represent and warrant to the
Plaintiffs that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date.
(a)
Organization of
the Seller
. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida as of the
date of this Agreement and the State of Delaware as of the Closing and has all
requisite corporate power and authority to carry on its business as presently
conducted. The Seller is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect. Except as disclosed in
Schedule
3(a)
, the Seller does not, directly or indirectly, control any other
Person, own or control any shares of capital stock or other securities of any
Person, or have any investment in any Person.
(b)
Articles of
Incorporation and Bylaws
. A true, complete and correct copy of the
Articles of Incorporation and the Amended and Restated Bylaws of the Seller,
each as amended to date, are attached to this Agreement as
Schedules
3(b)(i) and 3(b)(ii).
A copy of the Certificate of Incorporation and
Bylaws for the Seller after it reincorporates in Delaware are attached to this
Agreement as
Schedules
3(b)(iii) and 3(b)(iv)
. The Articles of Incorporation and the Bylaws are
in full force and effect and the Seller is not in violation or breach of any of
the provisions thereof. The Management has delivered to the Plaintiffs true,
complete and correct copies of the Articles of Incorporation and the Bylaws of
the Seller and all minutes of meetings and written consents in lieu of meeting
of the directors and shareholders of the Seller since January 1,
2005.
(c)
Capital
Structure
.
(i)
The authorized capital stock of the Seller consists solely of 50,000,000
shares of common stock, $0.01 par value per share, of which [20,105,867] shares
are issued and outstanding (the “Seller Shares”). Management collectively owns
[8,983,170] shares of the Seller’s common stock and options to purchase an
aggregate additional [8,000,000] common shares, all, free and clear of all Liens
(collectively, the “Management Shares and Options”). All of the Seller Shares
are and as of the Closing Date will be duly authorized, validly issued, fully
paid and non-assessable and not issued in violation of any preemptive rights and
the Seller Shares are registered with the SEC and all applicable securities
agencies and in accordance with all applicable securities laws and are fully
tradable as the registered shares of an Over-the-Counter Bulleting Board
company. The Seller Shares are not subject to preemptive rights or rights of
first refusal created by statute, the Articles of Incorporation or Bylaws of the
Seller, or any agreement to which the Seller or the Management is a party or by
which the Seller or the Management is bound. All of the Seller Shares have been
issued in compliance with all applicable federal and state securities laws.
Other than as disclosed in
Schedule
3(c)(i)
, there is no outstanding capital stock or other securities of
the Seller and no outstanding options, rights or commitments to issue such
capital stock or other securities. Other than as disclosed in
Schedule
3(c)(ii)
, the Seller has never adopted, sponsored or maintained any
stock option plan or any other plan or entered into any contract providing for
equity compensation to any Person and, as of the Closing Date, all such rights
and plans (if any) shall have been terminated and cancelled.
(ii)
Other than as disclosed in
Schedule
3(c)(iii)
, there is no subscription, option, warrant, call, right,
agreement or commitment relating to the issuance, sale, transfer or delivery by
the Seller or the Management (including any right of conversion or exchange
under any outstanding security or other instrument) of any of the Seller Shares
or any additional shares of the capital stock of the Seller. Except as disclosed
in this Agreement, there are no voting agreements, voting trusts, proxies,
powers-of-attorney, shareholder agreements or other agreements or understandings
relating to the
voting of the Seller Shares.
(iii)
Concurrently with the Closing and the consummation of the transactions
described in this Agreement, all of the Management Shares and Options (other
than the Purchased Management Stock) shall have been transferred and assigned to
the Seller for immediate cancellation (except for the Purchased Management
Stock), and following the transfer, assignment and cancellation of the
Management Shares and Options (other than the Purchased Management Stock), the
sole remaining issued and outstanding shares of common stock and options to
purchase common stock of the Seller shall be those set forth on
Schedule
3(c)(iv)
.
(iv)
From the date of the execution of this Agreement until the Closing Date,
the Seller will not change its capital structure, issue any new shares, options
or warrants or incur any secured indebtedness.
(d)
Authorization
of Transaction
. Subject to approval by the Seller’s shareholders, the
Seller and the Management have the requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
its and their respective obligations under this Agreement and the Ancillary
Agreements. Without limiting the generality of the foregoing, the Board of
Directors of the Seller and the Management have duly authorized the execution,
delivery, and performance of this Agreement and the Ancillary Agreements. This
Agreement and the Ancillary Agreements constitute the valid and legally binding
obligation of the Seller and the Management, enforceable in accordance with its
and their respective terms and conditions.
(e)
Noncontravention
.
Neither the execution and the delivery of this Agreement or the Ancillary
Agreements, nor the consummation of the transactions contemplated hereby or
thereby, including the assignments and assumptions referred to in Section 2
above, will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
Governmental Entity, or court to which the Seller or the Management is subject
or any provision of the charter or bylaws of the Seller or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Seller or the Management is a party or by
which it or they is or are bound or to which any of its or their respective
assets (real or personal) is subject or result in the imposition of any Security
Interest upon any of its or their respective assets (real or personal), except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest would
not have a Material Adverse Effect on the Seller or on the ability of the
Parties to consummate the transactions contemplated by this
Agreement.
(f)
No
Consents
. Except as set forth in
Schedule
3(f)
no consent, approval, authorization, permit or other order of or
filing with any Governmental Entity or any other Person is required in
connection with the execution, delivery or consummation of this Agreement or any
other agreement contemplated hereby to be executed by the Seller or the
Management (including, without limitation, the Ancillary
Agreements).
(g)
Brokers’
Fees
. The Seller and the management have no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(h)
SEC
Reports
. The Seller has filed with the SEC all reports required to be
filed since January 1, 2006, none of the reports filed with the SEC contained
any material statements which were not true and correct or omitted to state any
statements of material fact necessary in order to make the statements made not
misleading.
(i)
Financial Statements
. The Seller has filed with the SEC the following financial statements of the
Seller: (i) audited balance sheets, income statements, statements of
shareholders’ equity and statement of cash flows as of and for the fiscal years
ended December 31, 2007 and 2006; and (ii) unaudited balance sheets, income
statements and cash flow statements as of and for the three months ended March
31, 2008 and June 30, 2008 (collectively, the “Financial Statements”). The
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated, except that the unaudited
Financial Statements may not contain all footnotes required by GAAP (none of
which will be material). The Financial Statement presents fairly the financial
condition and operating results of the Seller as of the dates indicated, subject
in the case of the unaudited financial statements to normal year-end audit
adjustments (none of which will be material). The books and records of the
Seller are accurate and complete in all material respects and have been
maintained in accordance with reasonable business practices. No financial
statement of any Person other than the Seller is required by GAAP to be included
in the Financial Statements.
(j)
Changes
. Since March 31, 2008, there has not been any change, event or condition of any
character, whether or not in the Ordinary Course of Business, whether separately
or in the aggregate with other changes, events or conditions, that could
reasonably be expected to result in a Material Adverse Effect.
(k)
Legal
Compliance
. To the best of Management’s Knowledge, the Seller is and at
all times has been in material compliance with all Legal Rules applicable to it
and has complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments, including all applicable
federal and state securities laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced or is pending or threatened against the Seller alleging any failure to
so comply . The Seller has all applicable approvals and authorizations to
operate as a fully reporting Over-the-Counter Bulletin Board company and as of
the Closing Date will be up to date in all of its filings and will have filed
all reports with the SEC required to be filed by it and will be in full
compliance with all applicable federal and state securities laws and regulations
that are required for it to continue as a fully reporting Over-the-Counter
Bulletin Board company following the Closing.
(l)
Tax
Matters
.
(i)
Except as set forth in
Schedule
3(l)(i)
,
(1) the
Seller has filed all Tax Returns that it was required to file on or before the
date hereof, which Tax Returns are, true, correct and complete in all material
respects and reflect in all material respects the Tax liabilities of the Seller
for the applicable periods; (2) to the Knowledge of the Seller and Management,
all Taxes owed by the Seller (whether or not shown on any Tax Return) have been
paid; (3) the Seller is not currently the beneficiary of any extension of time
within which to file any Tax Return; and (4) no claim has ever been made in
writing by any Taxing Authority in a jurisdiction where the Seller does not file
Tax Returns that the Seller is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the Seller
that arose in connection with any failure, or alleged failure, to pay any Tax.
The Seller has withheld and paid all required Taxes in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
(ii)
The Seller has deducted, withheld and or remitted to the appropriate
Taxing Authority all Taxes required to have been deducted, withheld and/or
remitted by the Seller under any applicable Tax law in connection with amounts
paid or credited by the Seller to or for the account or benefit of any Person,
including without limitation, payments to any of its present or former
employees, independent contractors, stockholders, directors, officers, creditors
and non-residents of the United States, and the Seller has complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with the amounts paid to
such Persons.
(iii)
Schedule
3(l)(iii)
lists all Tax Returns filed by the Seller for taxable periods ending on or after
January 1
,
2001 and
with respect to those Tax Returns, indicates those Tax Returns that have been
audited and those Tax Returns that are currently being audited. The Seller has
delivered to the Plaintiffs accurate and complete copies of all such Tax
Returns.
The
Seller and the Management do not expect any Taxing Authority to assess any
additional Taxes for any period for which Tax Returns have been
filed.
(iv)
The Seller and the Management have not received notice from a Taxing
Authority, in writing or through personal contact with a Taxing Authority agent,
regarding any action, suit, proceeding, investigation, audit or claim, proposed
or pending against or with respect to the Seller in respect of any Taxes and, no
such action, suit, proceeding, investigation, audit or claim is pending or
threatened.
(v)
The Seller has not waived or extended any statute of limitations in
respect of any Taxes and no such waiver or extension has been requested from the
Seller by any Taxing Authority. The Seller has not agreed to any extension of
time with respect to a Tax assessment or deficiency. The Seller has not entered
into any closing agreement with the IRS pursuant to Code Section 7121 or any
similar agreement with any other Taxing Authority. There are no outstanding
rules for, or requests for rulings with any Tax Authority that are, or if issued
would be, binding on the Seller. No power of attorney currently in force has
been granted by the Seller concerning any Tax matter.
(vi)
The Seller has disclosed on its federal Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal Income
Tax within the meaning of Code Section 6662. The Seller is not a party to any
Tax allocation or Tax sharing agreement, and has no Liability for Taxes of any
Person (other than itself) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise. The Seller has not agreed to, nor is it required to
make, any adjustment under Code Section 481.
(m)
Real
Property
.
Schedule
3(m)
lists all real property owned by or leased or subleased to the
Seller. The Seller has delivered to the Plaintiffs correct and complete copies
of the leases and subleases listed on
Schedule
3(m)
. To the Knowledge of Management, each lease and sublease listed on
Schedule
3(m)
of the is legal, valid, binding, enforceable, and in full force and
effect, except where the illegality, invalidity, nonbinding nature,
unenforceability, or ineffectiveness would not have a Material Adverse Effect.
Schedule
3(m)
lists and describes briefly all real property that any of the Seller
owns. From and after the Closing Date, all of the foregoing leases to which the
Seller is a party shall have been terminated and the Seller shall have no
further Liability or obligation arising out of or related to any of the
foregoing leases. With respect to each such parcel of owned real
property:
(i)
except as reflected on
Schedule
3(m)
, the Seller has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent
and recorded easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of title, of the
property subject thereto;
(iii)
the legal description for the parcel contained in the deed thereof
describes such parcel fully and adequately, the buildings and improvements are
located within the boundary lines of the described parcels of land, are not in
violation of applicable setback requirements, zoning laws, and ordinances (and
none of the properties or buildings or improvements thereon are subject to
“permitted non-conforming use” or “permitted non-conforming structure”
classifications), and do not encroach on any easement which may burden the land,
the land does not serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(iv)
all facilities have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations;
(v)
there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the parcel of real property;
(vi)
there are no outstanding options or rights of first refusal to purchase
the parcel of real property, or any portion thereof or interest
therein;
(vii)
there are no parties (other than the Seller and its Subsidiaries) in
possession of the parcel of real property, other than tenants under any leases
disclosed in of the
Schedule
3(m)
who are in possession of space to which they are
entitled;
(viii)
all facilities located on the parcel of real property are supplied with
utilities and other services necessary for the operation of such facilities,
including gas, electricity, water, telephone, sanitary sewer, and storm sewer,
all of which services are adequate in accordance with all applicable laws,
ordinances, rules, and regulations and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting the parcel of real
property; and
(ix)
each parcel of real property abuts on and has direct vehicular access to
a public road, or has access to a public road via a permanent, irrevocable,
appurtenant easement benefiting the parcel of real property, and access to the
property is provided by paved public right-of-way with adequate curb cuts
available.
(n)
Intellectual
Property
.
Schedule
3(n)
identifies each patent or registration which has been issued to the
Seller with respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which the Seller has made
with respect to any of its intellectual property, and identifies each license,
agreement, or other permission which the Seller and has granted to any third
party with respect to any of its intellectual property. No royalties or fees are
payable by the Seller to any Person relating to any of the foregoing
Intellectual Property. To the Knowledge of the Seller and Management, the Seller
has not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any party from whom the Seller
has obtained the right to use Intellectual Property pursuant to license,
sublicense, agreement or permission of any other third party. To the Knowledge
of the Seller and Management, no third party has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Seller. To the Knowledge of the Seller and Management,
the Seller has not infringed upon, violated, interfered with, misused or
misappropriated any Intellectual Property rights of third parties and the Seller
has not received any written or, to the Knowledge of the Seller or Management
any oral, charge, complaint, claim, demand or notice alleging any such
infringement, violation, interference, misuse or misappropriation.
(o)
Contracts
.
Schedule
3(o)
lists all written contracts and other written agreements to which
the Seller is a party, the performance of which will involve consideration in
excess of $10,000. The Seller has delivered to the Plaintiffs a correct and
complete copy of each contract or other agreement listed in
Schedule
3(o
)
, each of
which will be assigned to the Buyer and all Liabilities thereunder assumed by
the Buyer as of the Closing Date.
(p)
Litigation.
Schedule
3(p)
sets
forth each instance in which the Seller or the Management (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, except where the injunction, judgment,
order, decree, ruling, action, suit, proceeding, hearing, or investigation would
not have a Material Adverse Effect. Except as set forth in
Schedule
3(p)
, there is no suit, action, hearing, claim or litigation, or legal,
administrative, arbitration or other proceeding (whether civil, criminal,
administrative, judicial, whether formal or informal, whether public or private,
including, without limitation, workers’ compensation and employment related
claims) (“Litigation”) pending or, to the Knowledge of the Seller or Management,
threatened against or affecting the Seller or any of the Seller’s properties or
assets, nor to the Knowledge of the Seller or Management, any investigation
pending or threatened against or affecting, the Seller or any of the Seller’s
properties or assets, before any Governmental Entity. To the Knowledge of the
Seller and Management, there is no Basis to believe that any such Litigation or
investigation may be brought against the Seller or any of its properties or
assets (including, to the Knowledge of the Seller or Management, no unreported
incidents that could reasonably be expected to lead to any workers’ compensation
claims against the Seller). None of the matters set forth in
Schedule
(3)(p)
could reasonably be expected to have a Material Adverse Effect on the Seller or
could reasonably be expected to materially adversely affect the ability of the
Seller or the Management to consummate the transactions contemplated hereby.
Except as set forth in
Schedule
3(p)
,
during the
past five (5) years, the Seller has not been made a party to or become the
subject of, nor to the Knowledge of the Seller and Management threatened to be
made a party to or become the subject of, any Litigation, and, to the Knowledge
of the Seller and Management, there is no Basis for any present or future
Litigation against the Seller.
(q)
Environmental,
Health, and Safety Matters
.
(i)
To the best of the Management’s Knowledge, the Seller is in compliance
with Environmental, Health, and Safety Requirements, except for such
noncompliance as would not have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Seller has obtained and complied with, and is
in compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations (if any) are set forth on
Schedule
3(q)(i)
.
(ii)
The Seller has not received any written notice, report or other
information regarding any actual or alleged material violation of Environmental,
Health, and Safety Requirements, or any material liabilities or potential
material liabilities, whether accrued, absolute, contingent, unliquidated or
otherwise, including any investigatory, remedial or corrective obligations,
relating to the Seller or its facilities arising under Environmental, Health,
and Safety Requirements, the subject of which would have a Material Adverse
Effect.
(iii)
Except as set forth in
Schedule
3(q)(iii)
, the present and former activities of the Seller comply and
have always complied in all material respects with all applicable Environmental
Laws.
(iv)
This Section 4 contains the sole and exclusive representations and
warranties of the Seller and Management with respect to any environmental,
health, or safety matters, including without limitation any arising under any
Environmental, Health, and Safety Requirements.
(r)
Labor
Matters
. Except as set forth in
Schedule
3(r)
, the Seller is not delinquent in any payment to any of its
employees, consultants, leased employees or independent contractors for any
wages, salaries, commissions, bonuses, or other compensation for any services
performed for it to the date of this Agreement or the Closing Date, The Seller
has withheld and paid to the appropriate Governmental Entity, or is holding for
payment not yet due to such Governmental Entity, all amounts required to be
withheld from employees of the Seller and is not liable for any arrears of
material wages, taxes, penalties or other sums for failure to comply with any of
the foregoing. The Seller has properly classified each of its respective
employees as employees and its independent contractors as independent
contractors. On the Closing Date, the Seller will have no Liability or
obligation owing to any of its Closing Date or former employees or independent
contractors for any wages, salaries, commissions, bonuses, severance or other
compensation or payments for any services performed for it to Closing
Date.
(s)
Shell
Company.
As of the Closing, the Seller will be a shell company with no
operations and no Liabilities, Liens, Litigation, encumbrances or Indebtedness
that is up to date in its filings and in compliance with all applicable federal
and state securities laws and regulations and its common stock will be traded on
the Over-the-Counter Bulletin Board.
(t)
Interested
Party Transactions
. As of the Closing, the Seller is not indebted to any
of the directors, officers or employees of the Seller (except for amounts due as
salaries, bonuses, commissions and reimbursements of expenses in the Ordinary
Course of Business), and no such Person is indebted to the Seller.
(u)
Absence of
Undisclosed Liabilities
. The Seller does not have any Liability except
for (a) Liabilities set forth and itemized in
Schedule
3(u)
, (b) Liabilities arising in the Ordinary Course of Business since
the date of its last Form 10-Q filed with the SEC, and (c) Liabilities reflected
or reserved against on the Seller’s balance sheet or disclosed in the
accompanying notes thereto, which individually or in the aggregate are not
material and are of the same character and nature as the Liabilities quantified
on the face of the balance sheet, none of which results from or relates to any
breach of Contract, breach of warranty, tort, infringement or breach of Law or
arose out of any Litigation. The Seller has not guaranteed any obligation of any
officer, director, employee of shareholder of Seller, or any other
Person.
(v)
Absence of
Undisclosed Options or Rights to Acquire Seller Shares
. Except as set
forth and itemized in
Schedules
3(v)
, the Seller has not issued and no person or entity has any rights
or options to acquire any of the Seller’s stock.
(w)
Control of
Seller
. Following the Plaintiff’s acquisition of the Purchased
Management Stock, the Plaintiffs will own and control a majority of the Seller’s
stock and in accordance with the Seller’s Articles and Bylaws, the Plaintiff
will have voting control and the right to control the operations and actions of
the Seller.
(x)
Disclaimer of
Other Representations and Warranties
. The Seller and the Management
shall not be deemed to have made to Plaintiffs any representations or warranties
other than those expressly made in this Section 3 and 4.
4.
Representations and Warranties of the
Buyer.
The Buyer
and the Management, jointly and severally, represent and warrant to the
Plaintiffs that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date.
(a)
Organization of
the Buyer
. The Buyer is a newly formed corporation duly organized,
validly existing, and in good standing under the laws of the State of Tennessee.
The Buyer was formed specifically for this transaction.
(b)
Authorization
of Transaction
. The
Buyer and the Management have all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to perform
its and their respective obligations under this Agreement and the Ancillary
Agreements. This Agreement and the Ancillary Agreements constitute the valid and
legally binding obligation of the Buyer and the Management (where applicable),
enforceable in accordance with their respective terms and
conditions.
(c)
Brokers’
Fees
. The Buyer and the Management have no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement or the Ancillary Agreements for
which the Seller could become liable or obligated.
5.
Covenants.
The
Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing.
(a)
Use of
Commercially Reasonable Efforts
. The Seller, the Buyer, the Management
and the Plaintiffs shall cooperate with each other and use all their respective
commercially reasonable efforts to take or cause to be taken all actions, and do
or cause to be done all things necessary, proper or advisable on their
respective parts to consummate and make effective the transactions contemplated
by this Agreement and the Ancillary Agreements as soon as reasonably
practicable. In exercising the foregoing right, each of the Seller, the Buyer,
the Management and the Plaintiffs shall act reasonably and as promptly as
reasonably practicable.
(b)
Notices and
Consents
. The Seller and the Management will give any notices to third
parties, and the Seller and the Management will use its commercially reasonable
efforts to obtain any third party consents, that are necessary to consummate the
transactions described in this Agreements and that the Plaintiffs reasonably may
request. All of the Parties will give any notices to, make any filings with, and
use its reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to herein. In connection with the foregoing, the Parties agree
that promptly following the execution of this Agreement the Management shall (a)
cause Harris Cramer, LLP to prepare a Proxy that will (i) be sent to the
Plaintiffs for their review and approval prior to being forwarded to the SEC and
the Seller’s shareholders, and (ii) seek approval by the Seller’s shareholders
of the transactions described herein, and (b) call a shareholders meeting
seeking approval of the transactions described herein and transmit the Proxy to
all of the Seller’s shareholders and take any required actions necessary to seek
approval of the transactions described herein by the Seller’s
shareholders.
(c)
Operation of
Business
. The Seller and the Management will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business.
(d)
Full
Access
. The Seller and the Management will permit representatives of the
Plaintiffs to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Seller to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to the Seller. The Plaintiffs will
treat and hold as such any Confidential Information they receive from the
Management and the Seller in the course of the reviews contemplated by this
Section 5(d), will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, will return to the Seller all tangible embodiments (and all
copies) of the Confidential Information which are in their
possession.
(e)
Notice of
Developments
.
(i)
The Seller and the Management shall promptly notify the Plaintiffs in
writing of any development causing a breach of any of its or their respective
representations and warranties in Section 3 above. Unless the Plaintiffs has the
right to terminate this Agreement pursuant to Section 7(a)(ii) below by reason
of the development and exercises that right within the period of 20 business
days, the written notice pursuant to this Section 5(e)(i) will be deemed to have
amended the Schedules or otherwise to have qualified the representations and
warranties contained in Section 3 above, and to have cured any misrepresentation
or breach of warranty that otherwise might have existed under this Agreement by
reason of the development.
(ii)
Each Party will give prompt written notice to the other Party of any
material adverse development causing a breach of any of its own representations
and warranties in Section 3 and Section 4 above. No disclosure by any Party
pursuant to this Section 5(e)(ii), however, shall be deemed to amend this
Agreement or to prevent or cure any misrepresentation or breach of
warranty.
(f)
Irrevocable
Proxy
.
The
Plaintiffs hereby grants the Seller’s Board of Directors an irrevocable proxy to
vote the Plaintiffs’ shares of common stock of the Seller in favor of the
approval of this Agreement in connection with the shareholder approval of this
Agreement. This proxy is coupled with an interest and shall not expire unless
this Agreement has terminated.
(g)
Cooperation
with Counsel
. Prior to and subsequent to the Closing, the Plaintiffs
shall cooperate with the Seller’s and the Management’s counsel in connection
with the preparation of any SEC filings, including, but not limited to the
Proxy. The Parties acknowledge and agree that (1) the Management and its legal
counsel shall be responsible along with the Seller (pre-Closing) to prepare and
file all SEC filings, including, but not limited to the Proxy that are necessary
to obtain approval for and consummate the transactions described in this
Agreement and the Ancillary Agreements, and (2) the Management and the Seller
(pre-Closing) shall be responsible for the payment of all transaction expenses
related to negotiation, preparation and consummation of the transactions
described in this Agreement and for the preparation and filing of all SEC
filings that are due prior to or on the Closing Date, including, but not limited
to the Proxy and the Form 10-Q for the quarter ending June, 2008 (and September,
2008, if applicable) that are necessary to obtain approval for and consummate
the transactions described in this Agreement, provided, however, the Plaintiffs
shall pay for or reimburse the Seller for the filing fees and Registered Agent’s
fees and expenses incurred in connection with the reincorporation in
Delaware.
(h)
California
Litigation
. Prior to the Closing, the Seller shall have settled the
California Litigation, and in any event, if there has not been a settlement of
the California Litigation, the Management shall, jointly and severally,
indemnify, defend and hold harmless the Plaintiffs against any and all losses
suffered, incurred or sustained by them or the Seller. All parties to the
California Litigation will pay their own expenses, including attorneys’ fees and
costs of the litigation, and will provide general releases to all parties of the
California Litigation, provided, however, that from and after the Closing Date,
the Seller will have no further Liability or obligations relating to the
settlement of the California Litigation. If the California Litigation is not
settled as of the Closing, the Management shall have the exclusive authority to
control the California Litigation as long as they timely pay all attorneys’ fees
and costs.
(i)
Voting of the
Management’s Shares
. At the shareholders meeting called to consider the
transaction contemplated by this Agreement, the Management agrees to vote their
shares of common stock in connection with the vote of the majority of other
shares which vote for or against the proposal to sell the assets of the Seller
to the Buyer.
(j)
Surrender of
Ownership
.
At
the Closing, the Management will return to the treasury of the Seller for
cancellation and Seller will cancel for no consideration all outstanding shares
of capital stock, stock options and warrants of the Seller (other than the
Purchased Management Stock) that are directly and/or indirectly owned and/or
controlled by the Management.
(k)
Amendment and
Restatement of Bylaws
. As soon as practicable, the Seller shall amend
and restate its Bylaws in the form attached as Schedule 3(b)(ii).
(l)
Reincorporation
in Delaware
. As soon as practicable, the Seller shall reincorporate in
Delaware since it has no Florida contacts.
6.
Conditions to Obligation to
Close.
(a)
Conditions to
Obligation of the Plaintiffs
. The Plaintiffs’s obligations under this
Agreement are subject to satisfaction of the following conditions:
(i)
the Seller’s and the Management’s representations and warranties set
forth in Sections 3 and 4 are true and correct in all material respects at and
as of the Closing Date;
(ii)
the Seller and the Management shall have performed and complied with all
of their covenants under this Agreement in all material respects through the
Closing;
(iii)
there shall not be any injunction, judgment, order, decree, ruling, or
charge in effect preventing consummation of any of the transactions contemplated
by this Agreement;
(iv)
the Seller and the Management shall have delivered to the Plaintiffs a
certificate to the effect that each of the conditions specified above in Section
6(a)(i)-(iii) is satisfied in all respects;
(v)
the Plaintiffs shall have received from counsel to the Buyer, Seller and
Management an opinion of counsel as attached as
Exhibit
I
, which is reasonably acceptable to legal counsel to the Plaintiffs,
addressed to the Plaintiffs, and dated as of the Closing Date;
(vi)
the Plaintiffs shall have received from the Seller and the Management
executed general releases in the form attached as
Exhibits
F
and
H
;
(vii)
all actions to be taken by the Seller and the Management in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents, including the Proxy, required to
effect the transactions contemplated hereby will be reasonably satisfactory in
form and substance to the Plaintiffs; and
(viii)
the Seller’s shareholders shall approve the sale of assets and all other
transactions contemplated by this Agreement at a meeting called for that
purpose.
(ix)
all Assumed Liabilities, contractual obligations, Liabilities and
Indebtedness of the Seller shall have been assigned to and assumed by the Buyer
as of the Closing Date with the Seller having been relieved of all Liability and
obligations for all such Assumed Liabilities, Contractual Obligations,
Indebtedness, Liability, and obligations.
(x)
all Liens, encumbrances, security agreements, Indebtedness, Security
Interests, financing statements, and mortgages on the assets (personal or real
property) of the Seller shall have been terminated.
(xi)
all Leases to which the Seller is a party or to which the Seller has any
Liability or obligation shall have been terminated as of the Closing
Date.
(xii)
the Seller and the Management shall have delivered to the Plaintiffs all
monies and items to be delivered pursuant to Section 2 of this Agreement,
including, but not limited to, $250,000 payment to EIG Venture Capital, Limited,
and the Purchased Management Stock, all in a form reasonably satisfactory to
Plaintiffs’ counsel.
(xiii)
the Seller and the Management shall have delivered all Schedules to this
Agreement to Plaintiffs’s counsel and Plaintiffs’ counsel shall be satisfied
with the form of all such Schedules.
(xiv)
the Buyer shall have hired all employees of the Seller as of the Closing
Date and shall have assumed and paid all amounts owing to such employees by the
Seller.
(xv)
the Seller shall have amended and restated its Bylaws in Florida and
reincorporated in Delaware.
The
Plaintiffs may waive any condition specified in this Section 6(a) if it executes
a writing so stating at or prior to the Closing.
(b)
Conditions to
Obligation of the Seller, the Buyer and the Management
. The Seller’s,
the Buyer’s and the Management’s obligations under this Agreement are subject to
the satisfaction of the following conditions:
(i)
the Plaintiffs shall have performed and complied with all of its
covenants under this Agreement in all material respects through the
Closing;
(ii)
there shall not be any injunction, judgment, order, decree, ruling, or
charge in effect preventing consummation of any of the transactions contemplated
by this Agreement;
(iii)
the Plaintiffs shall have delivered to the Seller and the Management an
executed general release in the form attached as
Exhibit
G
;
(iv)
the Plaintiffs shall have delivered to the Seller and the Management a
certificate to the effect that each of the conditions specified above in Section
6(b)(i)-(iii) is satisfied in all respects;
(v)
all actions to be taken by the Plaintiffs in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller;
(vi)
the Real Property owned by the Seller shall be conveyed to the Buyer and
the Mortgage on the Real Property in the name of the Seller shall have been
terminated; and
(vii)
the Seller’s shareholders shall approve the sale of assets and all other
transactions contemplated by this Agreement at a meeting called for that
purpose.
The
Seller may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.
7.
Termination.
(a)
Termination of
Agreement
. Certain of the Parties may terminate this Agreement as
provided below:
(i)
the Seller, the Buyer, the Plaintiffs, and Management may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii)
Plaintiffs may terminate this Agreement by giving written notice to the
Seller at any time prior to the Closing in the event (A) the Seller has within
the then previous 20 business days given the Plaintiffs any notice pursuant to
Section 5(e)(i) above and (B) the development that is the subject of the notice
has had a Material Adverse Effect;
(iii)
the Plaintiffs may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (A) in the event the Seller or the
Management has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Plaintiffs has notified
the Seller of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach,
provided
,
however
, that the Plaintiffs may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (and without providing a notice and
cure period to the Seller and the Management) in the events that (i) the Seller
does not file an Information Statement on Schedule 14C relating to the Seller’s
reincorporation in Delaware with the SEC on or before September 30, 2008, or
(ii) the Seller does not file a Preliminary Proxy Statement relating to the
transactions described in this Agreement with the SEC on or before October 31,
2008, or (B) if the Closing shall not have occurred on or before December 31,
2008, by reason of the failure of any condition precedent under Section 6(a)
hereof (unless the failure results primarily from the Plaintiffs themselves
breaching any covenant contained in this Agreement); and
(iv)
the Seller may terminate this Agreement by giving written notice to the
Plaintiffs at any time prior to the Closing (A) in the event the Plaintiffs has
breached any material covenant contained in this Agreement in any material
respect, the Seller has notified the Plaintiffs of the breach, and the breach
has continued without cure for a period of 30 days after the notice of breach or
(B) if the Closing shall not have occurred on or before December 31, 2008, by
reason of the failure of any condition precedent under Section 6(b) hereof
(unless the failure results primarily from the Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
(b)
Effect of
Termination
. If any Party terminates this Agreement pursuant to Section
7(a) above, all rights and obligations of the Parties under this Agreement shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); except, that the confidentiality
provisions contained in Section 5(d) above shall survive
termination.
8.
Additional Agreements
.
(a)
Conditions to
the Transaction
. Each Party shall take all reasonable actions necessary
to comply promptly with all Legal Rules, which may be imposed on such Party with
respect to the transactions contemplated hereby and shall promptly cooperate
with and furnish information to each other Party in connection with any such
requirements imposed upon each other Party or affiliate of each other Party in
connection with such transactions. Each Party shall take, and shall cause its
affiliates to take, all reasonable actions to obtain (and to cooperate with each
other Party and its affiliates in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity, or other third
party, required to be obtained or made by such Party or its affiliates in
connection with the transactions or the taking of any action contemplated
thereby or by this Agreement
(b)
Tax Returns of
the Seller; Responsibility for Payment of Taxes Post-Close
.
The
Seller shall in good faith prepare or cause to be prepared (and submit to the
Buyer and the Management for their respective review and comment which comments
the Seller shall consider and (if applicable) incorporate before filing) and
file or cause to be filed all Tax Returns for the Seller for all periods through
the Closing. If, after preparation of a Tax Return or after notice from a Taxing
Authority, the Seller determines that the Buyer and Management owe an amount for
Assumed Liabilities not already paid, the Seller shall provide the Buyer and
Management with written notice of the amount owed, along with a copy of the
corresponding Tax Return. The Buyer and Management shall remit the amount owed
to the Seller within fifteen (15) business days after receipt of such notice.
Additionally, the Buyer and Management shall gross up all payments made by the
Buyer and the Management pursuant to this Section 8(b) so that after the Seller
pays Taxes on such payment, it will have a net amount equal to the amount it
would have been entitled to receive if the payment had not been taxable income
to the Seller.
9.
Indemnification
.
(a)
Survival
. Except as otherwise expressly provided herein, all covenants and agreements of
the Buyer, the Management, and the Seller contained in this Agreement (including
those made in the Ancillary Agreements, Exhibits and Schedules hereto) shall
survive the Closing, except for any covenant or agreement that expressly
provides that it is to be performed for or survive for a given period of time,
which shall continue until the last date on which such covenant or agreement
expressly provides that it is to be performed or survives. All of the
representations and warranties of the Buyer, the Management and the Seller
contained in this Agreement (including those made in the Ancillary Agreements,
Exhibits and Schedules hereto), any updates to the Schedules referenced herein
and any other agreement, document or certificate delivered pursuant to this
Agreement shall survive the Closing and shall continue in full force and effect
for thirty-six (36) months thereafter, other than (a) the representations,
warranties, covenants and agreements contained in
Sections 2, 3(a), 3(c),
3(d), 3(e), 3(f), 3(g), 3(s), 4(a), 4(b) and 4(c)
(the “
Transactional Reps
”),
and the agreement contained in Section 8, which shall continue in full force and
effect indefinitely and (b) the representations, warranties, covenants and
agreements contained in
Sections 5.11(b)
,
3(h), 3(k), 3(l), 3(n)
and 3(q)
which shall continue in full force and effect until the
expiration of their respective statute of limitations (the “
Statutory Reps
”). In
the event that a notice of action or claim for indemnification under this
Section is given within the applicable survival periods set forth above, the
representation, warranty, covenant or agreement that is the subject of such
indemnification action or claim shall survive with respect to such action or
claim until such action or claim is finally resolved.
(b)
Indemnification
by the Buyer and Management
. Except as otherwise expressly provided in
this Section, on and after the Closing Date, the Buyer and the Management shall,
jointly and severally, defend, indemnify and hold harmless the Plaintiffs and
the Seller and each of their respective affiliates, partners, officers,
directors, employees, agents, successors and assigns (collectively, “
Plaintiffs’ Indemnified
Persons
”), and shall reimburse the Plaintiffs’s Indemnified Persons,
for, from and against, each and every demand, claim, cost, expense, loss,
Liability, judgment, damage, fine, penalty and fee including, without
limitation, reasonable attorneys’ fees (individually, a “
Loss
” and
collectively, the “
Losses
”) imposed on
or incurred by any of the Plaintiffs’s Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of (i) any breach of or
inaccuracy in any representation or warranty of the Buyer or the Management
under this Agreement, any Ancillary Agreement, any Schedule or Exhibit hereto or
any agreement, certificate or other document delivered or to be delivered
hereunder, determined in all cases without regard to the terms “material”
“materially” “Material Adverse Effect” or “Material Adverse Change”, (ii) any
breach, default or non-fulfillment of any covenant, agreement or other
obligation of the Buyer or the Management under this Agreement, any Ancillary
Agreement, any Schedule or Exhibit hereto or any agreement, certificate or other
document delivered or to be delivered hereunder or thereunder, or (iii) any
Third Party Claim that may be brought against any member of Plaintiffs or the
Seller or any affiliated person or entity based on or arising out of the entry
into this Agreement or consummation of the transactions described herein by the
Plaintiffs.
(c)
Notice and
Defense of Third-Party Claims
. If any action, claim or proceeding shall
be brought or asserted by a third party (a “
Third Party Claim
”)
against an indemnified party or any successor thereto (the “
Indemnified Person
”)
in respect of which indemnity may be sought under this Section from an
indemnifying person or any successor thereto (the “
Indemnifying
Person
”), the Indemnified Person shall give prompt written notice of such
Third Party Claim to the Indemnifying Person who shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Person and the payment of all expenses; except that any delay or
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations hereunder only to the extent, if at all, that it is
materially prejudiced by reason of such delay or failure. The Indemnified Person
shall have the right to employ separate counsel in any such Third Party Claim
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Person unless both the
Indemnified Person and the Indemnifying Person are named as parties and counsel
selected by the Indemnifying Person determines that the representation by the
same counsel is inappropriate. In the event that the Indemnifying Person, within
ten (10) days after notice of any such Third Party Claim, fails to assume the
defense thereof, the Indemnified Person shall have the right to undertake the
defense, compromise or settlement of such Third Party Claim for the account of
the Indemnifying Persons, subject to the right of the Indemnifying Person to
assume, at its expense, the defense of such Third Party Claim with counsel
satisfactory to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Anything in this Section to the
contrary notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person’s prior written consent, settle or compromise any Third Party
Claim or consent to the entry of any judgment with respect to any Third Party
Claim other than in accordance with the following sentence. The Indemnifying
Person may, without the Indemnified Person’s prior written consent, settle or
compromise any such Third Party Claim or consent to entry of any judgment with
respect to any such Third Party Claim that requires solely the payment of money
damages by the Indemnifying Person and that includes as an unconditional term
thereof the release by the claimant or the Plaintiffs of the Indemnified Person
from all Liability with respect to such Third Party Claim.
(d)
Non-Third Party
Claims
. An Indemnified Person will notify the Indemnifying Person in
writing promptly of its discovery of any matter that does not involve a Third
Party Claim in respect of which indemnity may be sought under this Section,
which written notice shall specify the nature of the claim and the amount of
Losses therefor. In the event that the Indemnifying Person does not notify the
Indemnified Person in writing that it disputes such claim within thirty (30)
days from receipt of such written notice of claim, specifying in reasonable
detail the basis for contesting such claim, the Indemnifying Person will be
deemed to have acknowledged liability for such claim and the amount of Losses
therefor and Indemnifying Person shall promptly pay the amount of such Losses to
the Indemnified Party. The Indemnified Person will reasonably cooperate and
assist the Indemnifying Person in determining the validity of any claim for
indemnity by the Indemnifying Person and in otherwise resolving such
matters.
10.
Miscellaneous.
(a)
Severability
. In the
event any parts of this Agreement are found to be void, the remaining provisions
of this Agreement shall nevertheless be binding with the same effect as though
the void parts were deleted.
(b)
Counterparts
. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. The execution of this Agreement may be by actual or facsimile
signature.
(c)
Notices and
Addresses
. All notices, offers, acceptance and any other acts under this
Agreement (except payment) shall be in writing, and shall be sufficiently given
if delivered to the addressees in person, by Federal Express or similar
overnight next business day delivery, or by facsimile delivery followed by
overnight next business day delivery, as follows:
|
To the Buyer:
|
|
1059 E. Tri-County Boulevard
|
|
|
|
Oliver Springs, TN 37840
|
|
|
|
Facsimile: (865) 482-8477
|
|
|
|
|
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With a Copy to:
|
|
Lisa A. Temple, Esq.
|
|
|
|
Hatfield & Temple, P.C.
|
|
|
|
1053 E. Tri County Boulevard
|
|
|
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Oliver Springs, TN 37840
|
|
|
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Facsimile: (865) 381-1338
|
|
|
|
|
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To the Seller:
|
|
1059 E. Tri-County Boulevard
|
|
|
|
Oliver Springs, TN 37840
|
|
|
|
Facsimile: (865) 482-8477
|
|
|
|
|
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With a Copy to:
|
|
Michael D. Harris, Esq.
|
|
|
|
Harris Cramer LLP
|
|
|
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1555 Palm Beach Lakes Boulevard, Suite 310
|
|
|
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West Palm Beach, FL 33401
|
|
|
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Facsimile: (561) 659-0701
|
|
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and
|
|
Lisa A. Temple, Esq.
|
|
|
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Hatfield & Temple, P.C.
|
|
|
|
1053 E. Tri County Boulevard
|
|
|
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Oliver Springs, TN 37840
|
|
|
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Facsimile: (865) 381-1338
|
|
|
|
|
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To Management:
|
|
℅ Diversified Product Inspections, Inc.
|
|
|
|
1059 E. Tri-County Boulevard
|
|
|
|
Oliver Springs, TN 37840
|
|
|
|
Facsimile: (865) 482-8477
|
|
|
|
|
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With a Copy to:
|
|
Lisa A. Temple, Esq.
|
|
|
|
Hatfield & Temple, P.C.
|
|
|
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1053 E. Tri County Boulevard
|
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Oliver Springs, TN 37840
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Facsimile: (865) 381-1338
|
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To the Plaintiffs:
|
|
Sofcon, Limited
|
|
|
|
EIG Venture Capital, Limited
|
|
|
|
EIG Capital Investments, Limited
|
|
|
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c/o Jan Telander, President
|
|
|
|
EIG Capital
|
|
|
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Calle Azucena 37
|
|
|
|
Torreblanca del Sol
|
|
|
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29640 Fuengirola, Spain
|
|
|
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Facsimile: (+34) 952-477-047
|
|
|
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|
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With a Copy to:
|
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Robert S. Bick, Esq.
|
|
|
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Williams, Williams, Rattner & Plunkett, P.C.
|
|
|
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380 North Old Woodward Avenue
|
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|
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Suite 300
|
|
|
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Birmingham, Michigan 48009
|
|
|
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Facsimile: (248) 642-0856
|
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|
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and to
|
|
Joseph B. LaRocco, Esq.
|
|
|
|
49 Locust Avenue
|
|
|
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Suite 107
|
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New Cannan, CT 06840
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|
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Facsimile: (203) 966-0363
|
or to
such other address as any of them, by notice to the other may designate from
time to time. The transmission confirmation receipt from the sender’s facsimile
machine shall be evidence of successful facsimile delivery. Time shall be
counted from the date of transmission.
(d)
Attorney’s
Fees
. In the event that there is any controversy or claim arising out of
or relating to this Agreement or the Ancillary Agreements, or to the
interpretation, breach or enforcement thereof, and any action or arbitration
proceeding is commenced to enforce the provisions of this Agreement, the
prevailing Party shall be entitled to a reasonable attorney's fee, including the
fees on appeal, costs and expenses.
(e)
Governing
Law
. This Agreement and any dispute, disagreement, or issue of
construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the laws of the State of Florida. The
resolution of any dispute arising out of this Agreement or any Ancillary
Agreement shall be adjudicated by a court of competent jurisdiction located in
the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida.
(f)
Oral
Evidence
. This Agreement constitutes the entire Agreement between the
parties and supersedes all prior oral and written agreements between the parties
hereto with respect to the subject matter hereof. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, except
by a statement in writing signed by the party or parties against which
enforcement or the change, waiver discharge or termination is
sought.
(g)
Section or
Paragraph Headings
. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Agreement.
(h)
Force
Majeure
. Force majeure shall mean no strikes; labor disputes;
freight embargoes; interruption or failure in the Internet, telephone or other
telecommunications service or related equipment; material interruption in the
mail service or other means of communication with the United States; if the
Seller shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage, or other calamity or malicious
act, whether or not such loss shall have been insured; acts of God; outbreak or
material escalation of hostilities or civil disturbances, national emergency or
war (whether or not declared), or other calamity or crises including a terrorist
act or acts affecting the United States; future laws, rules, regulations or acts
of any government (including any orders, rules or regulations issued by any
official or agency of such government); or any cause beyond the reasonable
control of such Party.
(i)
Survival of
Representations and Warranties
. All of the representations and
warranties of the Parties contained in this Agreement shall survive the
Closing.
(j)
Press Releases
and Public Announcements
. No Party shall issue any press release or make
any public announcement relating to the subject matter of this Agreement prior
to the Closing without the prior written approval of the other Party; except,
that any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure.
(k)
No Third-Party
Beneficiaries
. The terms and provisions of this Agreement are intended
solely for the benefit of the Parties hereto and their respective successors and
permitted assigns, and it is not the intention of the Parties to confer
third-party beneficiary rights and this Agreement does confer any such rights
upon any other purpose.
(l)
Expenses
. The Plaintiffs, the Management, the Buyer and the Seller will bear their own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(m)
Drafting.
The Parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this
Agreement.
In
witness whereof, the undersigned has executed this Asset Purchase Agreement as
of the date first written above.
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WITNESSES:
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DIVERSIFIED
PRODUCT INSPECTIONS, LLC
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By:
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/s/
John Van Zyll
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John
Van Zyll, Authorized Member and Manager
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DIVERSIFIED
PRODUCT INSPECTIONS, INC.
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By:
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/s/
John Van Zyll
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John
Van Zyll, President
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/s/
John Van Zyll
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John
Van Zyll
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/s/
Ann Furlong
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Ann
Furlong
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/s/
Marvin Stacy
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Marvin
Stacy
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SOFCON,
LIMITED
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By:
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/s/
Jan Telander
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Jan
Telander, President
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EIG
VENTURE CAPITAL, LIMITED
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By:
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/s/
Jan Telander
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Jan
Telander, President
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EIG
CAPITAL INVESTMENTS, LIMITED
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By:
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/s/
Jan Telander
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Jan
Telander,
President
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EXHIBIT
A
BILL OF
SALE
KNOW ALL MEN BY THESE PRESENTS
that DIVERSIFIED PRODUCT INSPECTIONS, INC., a Florida corporation, whose address
is 1059 E. Tri County Boulevard, Oliver Springs, Tennessee 37840 (“Seller”) does
hereby sell, assign, transfer, and convey to DIVERSIFIED PRODUCT INSPECTIONS,
LLC, a Tennessee limited liability company, whose address is 1059 E. Tri County
Boulevard, Oliver Springs, Tennessee 37840 (the “Buyer”), pursuant to that
certain Settlement Agreement and Asset Purchase Agreement by and among Buyer,
Seller, John Van Zyll, Ann Furlong, and Marvin Stacy (collectively, the
“Management”) and Sofcon, Limited, a Belize corporation, EIG Venture Capital,
Limited, a Belize corporation, and EIG Capital Investments, Limited, a Belize
corporation (collectively, the “Plaintiffs”) (the “Asset Purchase Agreement”),
free and clear of any and all liens, claims, security interests, and
encumbrances of any kind, except for those associated with the Assumed
Liabilities, as defined in the Asset Purchase Agreement, all right, title and
interest of the Seller in and to the Acquired Assets, as defined in the Asset
Purchase Agreement.
The
Seller hereby constitutes and appoints the Buyer, and its successors and
assigns, the true and lawful attorney of the Seller, with full power of
substitution, for the Seller and in the Seller’s name, place and stead to
execute and deliver any and all instruments of assignment necessary or advisable
to accomplish the purposes of this Bill of Sale.
The
Seller for itself and its successors and assigns, does hereby covenant with the
Buyer and its successors and assigns that the Seller and/or its successors and
assigns, shall upon request by the Buyer, execute and deliver any and all
additional documents, assignments, instruments of conveyance, transfer and/or
confirmation, as may be requested by the Buyer and/or which may be necessary for
the purpose of vesting and/or evidencing title in and to the Acquired Assets
free and clear of any liens, claims and encumbrances in the name of the
Buyer.
Any
capitalized terms that are used in this Bill of Sale that are not defined herein
shall have the respective meanings ascribed in the Asset Purchase
Agreement.
IN WITNESS WHEREOF
, the
undersigned Seller has caused this Bill of Sale to be executed on this _____ day
of ______________, 2008.
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“SELLER”
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DIVERSIFIED
PRODUCT INSPECTIONS, INC.
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By:
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John
Van Zyll
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Its:
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President
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EXHIBIT
B
ASSIGNMENT AND ASSUMPTION OF
ASSUMED LIABILITIES
Assignment
and Assumption of Assumed Liabilities (“Agreement”), dated ________, 2008, is
made by Diversified Product Inspections, LLC, a Tennessee limited liability
(“Buyer”) in favor of Diversified Product Inspections, Inc., a Florida
corporation (“Seller”). All capitalized terms used in this Agreement that are
not defined herein shall have the respective meanings ascribed to them in the
Settlement Agreement and Asset Purchase Agreement, dated as of September ___,
2008, (the “Asset Purchase Agreement”) by and among Buyer, Seller, John
Van Zyll, Ann Furlong, and Marvin Stacy (collectively, the “Management”) and
Sofcon, Limited, a Belize corporation, EIG Venture Capital, Limited, a Belize
corporation, and EIG Capital Investments, Limited, a Belize corporation
(collectively, the “Plaintiffs”).
Pursuant
to the Asset Purchase Agreement, the undersigned agrees as follows:
1.
Buyer hereby assumes and agrees to perform, pay and discharge all of the Assumed
Liabilities and all Liabilities and obligations of the Seller arising from or
relating to all periods prior to and on the Closing Date (whether or not those
Liabilities and obligations are known or unknown at the time of Closing and
whether or not they become due before, on or after the Closing
Date.
2.
Buyer, by its execution of this Agreement of Assignment and Assumption of
Liabilities, and Seller, by its acceptance of this Agreement of Assignment and
Assumption of Liabilities, hereby acknowledge and agree that neither the
representations and warranties nor the rights and remedies of either party under
the Asset Purchase Agreement shall be deemed to be limited, modified or altered
in any way by such execution and acceptance of this Agreement.
3.
The assignment to and assumption of the Assumed Liabilities by Buyer shall be
deemed to occur at the close of business on the Closing Date.
IN
WITNESS WHEREOF, Buyer and Seller have caused this instrument to be duly
executed under seal as of and on the date first above written.
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BUYER:
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DIVERSIFIED
PRODUCT INSPECTIONS, LLC
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By:
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John
Van Zyll
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Its:
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Authorized
Member and Manager
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SELLER:
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DIVERSIFIED
PRODUCT INSPECTIONS, INC.
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By:
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John
Van Zyll
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Its:
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President
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ASSIGNMENT
OF STOCK
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
JOHN VAN
ZYLL
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
EIG VENTURE CAPITAL, LIMITED
,
a Belize corporation (“
Assignee
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC
,
a
Tennessee limited liability company, Diversified Product Inspections, Inc., a
Florida corporation (the “
Corporation
”),
Assignor, Ann Furlong, Marvin Stacy, Sofcon, Limited, a Belize corporation,
Assignee and EIG Capital Investments, Limited, a Belize corporation (the “
Settlement
Agreement
”), One Million (1,000,000) shares of the common stock of the
Corporation, standing in Assignor’s name on the books of said Corporation (the “
Stock
”),
and Assignor does hereby consent to the transfer of the Stock with full power of
substitution in the premises in accordance with the terms and conditions set
forth in the Settlement Agreement.
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Dated:
____________, 2008
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John
Van Zyll
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EXHIBIT
C-2
ASSIGNMENT
OF STOCK AND OPTIONS FOR CANCELLATION
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
JOHN VAN
ZYLL
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
DIVERSIFIED PRODUCT INSPECTIONS,
INC.
, a Florida corporation (the “
Corporation
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC, a Tennessee limited liability company, the Corporation,
Assignor, Ann Furlong, Marvin Stacy, Sofcon, Limited, a Belize corporation, EIG
Venture Capital, Limited, a Belize corporation, and EIG Capital Investments,
Limited, a Belize corporation (the “
Settlement
Agreement
”), Three Million Nine Hundred Fifty-Three Thousand Seven
Hundred Twenty-Four (3,953,724) shares of the common stock of the Corporation,
standing in Assignor’s name on the books of said Corporation (the “
Stock
”)
and all options and rights of Assignor to acquire shares of stock in the
Corporation, for immediate cancellation.
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Dated:
_________ ___, 2008
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John
Van Zyll
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EXHIBIT
C-3
ASSIGNMENT
OF STOCK
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
Marvin
Stacy
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
EIG VENTURE CAPITAL, LIMITED
,
a Belize corporation (“
Assignee
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC, a Tennessee limited liability company, Diversified Product
Inspections, Inc., a Florida corporation (the “
Corporation
”),
John Van Zyll, Ann Furlong, Assignor, Sofcon, Limited, a Belize corporation,
Assignee and EIG Capital Investments, Limited, a Belize corporation (the “
Settlement
Agreement
”), One Million (1,000,000) shares of the common stock of the
Corporation, standing in Assignor’s name on the books of said Corporation (the “
Stock
”),
and Assignor does hereby consent to the transfer of the Stock with full power of
substitution in the premises in accordance with the terms and conditions set
forth in the Settlement Agreement.
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Dated:
___________ ___, 2008
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Marvin
Stacy
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EXHIBIT
C-4
ASSIGNMENT
OF STOCK AND OPTIONS FOR CANCELLATION
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
MARVIN
STACY
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
DIVERSIFIED PRODUCT INSPECTIONS,
INC.
, a Florida corporation (the “
Corporation
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC, a Tennessee limited liability company, the Corporation, John
Van Zyll, Ann Furlong, Assignor, Sofcon, Limited, a Belize corporation, EIG
Venture Capital, Limited, a Belize corporation, and EIG Capital Investments,
Limited, a Belize corporation (the “
Settlement
Agreement
”), Nine Hundred Eighty-Five Thousand Two Hundred Twenty-Three
(985,223) shares of the common stock of the Corporation, standing in Assignor’s
name on the books of said Corporation (the “
Stock
”)
and all options and rights of Assignor to acquire shares of stock in the
Corporation, for immediate cancellation.
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Dated:
_________ ___, 2008
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Marvin
Stacy
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EXHIBIT
C-5
ASSIGNMENT
OF STOCK
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
ANN FURLONG
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
EIG VENTURE CAPITAL, LIMITED
,
a Belize corporation (“
Assignee
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC, a Tennessee limited liability company, Diversified Product
Inspections, Inc., a Florida corporation (the “
Corporation
”),
John Van Zyll, Assignor, Marvin Stacy, Sofcon, Limited, a Belize corporation,
Assignee and EIG Capital Investments, Limited, a Belize corporation (the “
Settlement
Agreement
”), One Million (1,000,000) shares of the common stock of the
Corporation, standing in Assignor’s name on the books of said Corporation (the “
Stock
”),
and Assignor does hereby consent to the transfer of the Stock with full power of
substitution in the premises in accordance with the terms and conditions set
forth in the Settlement Agreement.
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Dated:
___________ ___, 2008
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Ann
Furlong
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EXHIIBIT
C-6
ASSIGNMENT
OF STOCK AND OPTIONS FOR CANCELLATION
[Separate
from Certificate]
FOR VALUE RECEIVED,
the
undersigned,
ANN FURLONG
(“
Assignor
") does hereby sell, assign, deliver, and transfer onto
DIVERSIFIED PRODUCT INSPECTIONS,
INC.
, a Florida corporation (the “
Corporation
”),
pursuant to and in accordance with the terms and conditions that are set forth
in that certain
SETTLEMENT
AGREEMENT AND ASSET PURCHASE AGREEMENT
by and among Diversified Product
Inspections, LLC, a Tennessee limited liability company, the Corporation, John
Van Zyll, Assignor, Marvin Stacy, Sofcon, Limited, a Belize corporation, EIG
Venture Capital, Limited, a Belize corporation, and EIG Capital Investments,
Limited, a Belize corporation (the “
Settlement
Agreement
”), One Million Forty-Four Thousand Two Hundred Twenty-Three
(1,044,223) shares of the common stock of the Corporation, standing in
Assignor’s name on the books of said Corporation (the “
Stock
”)
and all options and rights of Assignor to acquire shares of stock in the
Corporation, for immediate cancellation.
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Dated:
___________ ___, 2008
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Ann
Furlong
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EXHIBIT
D-1
___________________,
2008
The Board
of Directors
Diversified
Product Inspections, Inc.
1059 E.
Tri-County Boulevard
Oliver
Springs, TN 37840
Ladies
and Gentlemen:
This
resignation letter is being provided pursuant to the terms of a certain
Settlement Agreement and Asset Purchase Agreement dated September _____, 2008
(the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the
undersigned hereby tenders his resignation as an Office and Director of
Diversified Product Inspections, Inc. effective immediately.
EXHIBIT
D-2
___________________,
2008
The Board
of Directors
Diversified
Product Inspections, Inc.
1059 E.
Tri-County Boulevard
Oliver
Springs, TN 37840
Ladies
and Gentlemen:
This
resignation letter is being provided pursuant to the terms of a certain
Settlement Agreement and Asset Purchase Agreement dated September _____, 2008
(the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the
undersigned hereby tenders his resignation as an Office and Director of
Diversified Product Inspections, Inc. effective immediately.
EXHIBIT
D-3
______________________,
2008
The Board
of Directors
Diversified
Product Inspections, Inc.
1059 E.
Tri-County Boulevard
Oliver
Springs, TN 37840
Ladies
and Gentlemen:
This
resignation letter is being provided pursuant to the terms of a certain
Settlement Agreement and Asset Purchase Agreement dated September ____, 2008
(the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the
undersigned hereby tenders her resignation as an Office and Director of
Diversified Product Inspections, Inc. effective immediately.
EXHIBIT
D-4
___________________,
2008
The Board
of Directors
Diversified
Product Inspections, Inc.
1059 E.
Tri-County Boulevard
Oliver
Springs, TN 37840
Ladies
and Gentlemen:
This
resignation letter is being provided pursuant to the terms of a certain
Settlement Agreement and Asset Purchase Agreement dated September _____, 2008
(the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the
undersigned hereby tenders his resignation as an Office and Director of
Diversified Product Inspections, Inc. effective immediately.
EXHIBIT
D-5
___________________,
2008
The Board
of Directors
Diversified
Product Inspections, Inc.
1059 E.
Tri-County Boulevard
Oliver
Springs, TN 37840
Ladies
and Gentlemen:
This
resignation letter is being provided pursuant to the terms of a certain
Settlement Agreement and Asset Purchase Agreement dated September _____, 2008
(the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the
undersigned hereby tenders his resignation as an Office and Director of
Diversified Product Inspections, Inc. effective immediately.
EXHIBIT
E
DIVERSIFIED PRODUCT
INSPECTIONS, INC.
CONSENT RESOLUTIONS OF THE
BOARD OF DIRECTORS
The
undersigned, constituting all of the members of the Board of Directors of
Diversified Product Inspections,
Inc.
, a Florida corporation (the “
Corporation
”), hereby
consent, in writing, to the actions embodied in the following resolutions,
without a meeting:
RESOLVED
, that JAN TELANDER
is appointed to the Board of Directors of the Corporation; and be it
further
RESOLVED,
that, Section 3.01
of the Corporation’s Bylaws is amended to change to permissible number of
Directors from a minimum of 3 and a maximum of 9 to a minimum of 1 and a maximum
of 5 (the “
Bylaw
Amendment
”); and be it further
RESOLVED
, that any Officer of
the Corporation be, and each of them hereby is, authorized, empowered and
directed to file the Bylaw Amendment with the records of the Corporation; and be
it further
RESOLVED
, that the
resignations of JOHN VAN ZYLL, ANN FURLONG, MARVIN STACY, WILLARD WANKELMAN and
MATHEW WALTERS as Officers of the Corporation are hereby accepted; and be it
further
RESOLVED
, that JAN TELANDER,
is appointed the sole Officer of the Corporation; and be it further
RESOLVED
, that the
resignations of JOHN VAN ZYLL, ANN FURLONG, MARVIN STACY, WILLARD WANKELMAN and
MATHEW WALTERS as Directors of the Corporation are hereby accepted.
Dated:
_____________________ __, 2008
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John
Van Zyll
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Ann
Furlong
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Marvin
Stacy
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Matthew
Walters
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Willard
Wankelman
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EXHIBIT
F
SELLER’S
GENERAL RELEASE
This
General Release of Seller (this “
Release
”) is being executed
and delivered in accordance with Section 2(h) of the Settlement Agreement and
Asset Purchase Agreement dated as of September ________, 2008 (the “
Asset Purchase
Agreement
”) by and among
Diversified Product Inspections, LLC, a Tennessee limited liability company (the
“Buyer”), Diversified Product Inspections, Inc., a Florida corporation (the
“Seller”), John Van Zyll, Ann Furlong, and Marvin Stacy (collectively, the
“Management”) and Sofcon, Limited, a Belize corporation, EIG Venture Capital,
Limited, a Belize corporation, and EIG Capital Investments, Limited, a Belize
corporation (collectively, the “Plaintiffs”). Capitalized terms used in this
Release without definition have the respective meanings ascribed to them in the
Asset Purchase Agreement.
The
Seller acknowledges that execution and delivery of this Release is a condition
to the Plaintiffs’ obligation to enter into the Asset Purchase Agreement and to
consummate the transactions contemplated by the Asset Purchase Agreement, and
that the Plaintiffs are relying on this Release in consummating such
transactions.
The
Seller, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, in order to
induce the Plaintiffs to consummate the transactions contemplated in the Asset
Purchase Agreement, hereby agrees as follows:
Except as
provided below, the Seller, on behalf of itself, and each of its Directors,
Officers, shareholders and employees, or Persons controlled by, controlling or
under common control with Seller (together, “
Related Persons
”), hereby
releases and forever discharges the Plaintiffs (individually, a “
Releasee
” and collectively, “
Releasees
”) from any
and all claims, demands, proceedings, causes of action, and other liabilities
whatsoever, whether known or unknown, absolute or contingent, direct or indirect
or nominally or beneficially claimed or possessed, both at law and in equity,
which the Seller or any of its respective Related Persons have against the
respective Releasees arising contemporaneously with or prior to the Closing Date
arising out of or related to the claims asserted in the Pending Litigation
(collectively, “
Liabilities
”).
The
Seller hereby irrevocably covenants to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby. Notwithstanding the preceding, this
Release shall not operate, nor shall it be construed, to release the Buyer,
Management or Plaintiffs from their respective duties and obligations arising
out of the Asset Purchase Agreement.
The
Seller expressly acknowledges that it has received the advice of counsel prior
to signing this Release.
The
Seller acknowledges that it may hereafter discover facts different from or in
addition to those it now knows or believes to be true with respect to the
matters released herein. The Seller acknowledges that the releases contained
herein shall remain effective in all respects notwithstanding such different or
additional facts.
If any
provision of this Release is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Release will remain in full
force and effect. Any provision of this Release held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
This
Release may not be changed except in a writing signed by the person(s) against
whose interest such change shall operate. This Release shall be governed by and
construed under the laws of the State of Florida without regard to principles of
conflicts of law.
All words
used in this Release will be construed to be of such gender or number as the
circumstances require.
IN
WITNESS WHEREOF, the Seller has executed and delivered this Release as of this
___ day of ________, 2008.
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Diversified
Product Inspections, Inc.
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By:
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John
Van Zyll
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|
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Its:
|
President
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EXHIBIT
G
PLAINTIFFS’
GENERAL RELEASE
This
General Release of Plaintiffs (this “
Release
”) is being executed
and delivered in accordance with Section 2(h) of the Settlement Agreement and
Asset Purchase Agreement dated as of September _______, 2008 (the “
Asset Purchase
Agreement
”) by and among
Diversified Product Inspections, LLC, a Tennessee limited liability company (the
“Buyer”), Diversified Product Inspections, Inc., a Florida corporation (the
“Seller”), John Van Zyll, Ann Furlong, and Marvin Stacy (collectively, the
“Management”) and Sofcon, Limited, a Belize corporation, EIG Venture Capital,
Limited, a Belize corporation, and EIG Capital Investments, Limited, a Belize
corporation (collectively, the “Plaintiffs”). Capitalized terms used in this
Release without definition have the respective meanings ascribed to them in the
Asset Purchase Agreement.
The
Plaintiffs acknowledge that execution and delivery of this Release is a
condition to the Seller’s and Management’s obligations to enter into the Asset
Purchase Agreement and to consummate the transactions contemplated by the Asset
Purchase Agreement, and that the Seller and Management are relying on this
Release in consummating such transactions.
The
Plaintiffs, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, in order to
induce the Seller and Management to consummate the transactions contemplated in
the Asset Purchase Agreement, hereby agree as follows:
Except as
provided below, the Plaintiffs, on behalf of themselves, and each of their
respective Directors, Officers, shareholders and employees, or Persons
controlled by, controlling or under common control with each Plaintiff
(together, “
Related
Persons
”), hereby release and forever discharge the Seller and the
Management (individually, a “
Releasee
” and collectively, “
Releasees
”) from any
and all claims, demands, proceedings, causes of action, and other liabilities
whatsoever, whether known or unknown, absolute or contingent, direct or indirect
or nominally or beneficially claimed or possessed, both at law and in equity,
which the Plaintiffs or any of their respective Related Persons have against the
respective Releasees arising contemporaneously with or prior to the Closing Date
arising out of or related to the claims asserted in the Pending Litigation
(collectively, “
Liabilities
”).
The
Plaintiffs hereby irrevocably covenant to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby. Notwithstanding the preceding, this
Release shall not operate, nor shall it be construed, to release the Buyer,
Management or Seller from their respective duties and obligations arising out of
the Asset Purchase Agreement.
The
Plaintiffs expressly acknowledge that they have received the advice of counsel
prior to signing this Release.
The
Plaintiffs acknowledge that they may hereafter discover facts different from or
in addition to those they now know or believe to be true with respect to the
matters released herein. The Plaintiffs acknowledge that the releases contained
herein shall remain effective in all respects notwithstanding such different or
additional facts.
If any
provision of this Release is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Release will remain in full
force and effect. Any provision of this Release held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
This
Release may not be changed except in a writing signed by the person(s) against
whose interest such change shall operate. This Release shall be governed by and
construed under the laws of the State of Florida without regard to principles of
conflicts of law.
All words
used in this Release will be construed to be of such gender or number as the
circumstances require.
IN
WITNESS WHEREOF, the Plaintiffs have executed and delivered this Release as of
this ___ day of ________, 2008.
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SOFCON,
LIMITED
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By:
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Jan
Telander, President
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EIG
VENTURE CAPITAL, LIMITED
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By:
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Jan
Telander, President
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EIG
CAPITAL INVESTMENTS, LIMITED
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By:
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Jan
Telander,
President
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EXHIBIT
H
MANAGEMENT’S
GENERAL RELEASE
This
General Release of Management (this “
Release
”) is being executed
and delivered in accordance with Section 2(h) of the Settlement Agreement and
Asset Purchase Agreement dated as of September _______, 2008 (the “
Asset Purchase
Agreement
”) by and among
Diversified Product Inspections, LLC, a Tennessee limited liability company (the
“Buyer”), Diversified Product Inspections, Inc., a Florida corporation (the
“Seller”), John Van Zyll, Ann Furlong, and Marvin Stacy (collectively, the
“Management”) and Sofcon, Limited, a Belize corporation, EIG Venture Capital,
Limited, a Belize corporation, and EIG Capital Investments, Limited, a Belize
corporation (collectively, the “Plaintiffs”). Capitalized terms used in this
Release without definition have the respective meanings ascribed to them in the
Asset Purchase Agreement.
The
Management acknowledges that execution and delivery of this Release is a
condition to the Plaintiffs’ obligation to enter into the Asset Purchase
Agreement and to consummate the transactions contemplated by the Asset Purchase
Agreement, and that the Plaintiffs are relying on this Release in consummating
such transactions.
The
Management, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, in order to
induce the Plaintiffs to consummate the transactions contemplated in the Asset
Purchase Agreement, hereby agrees as follows:
Except as
provided below, the Management, on behalf of itself, and each Person
constituting the Management, and any Person controlled by each of them,
controlling or under common control with Management (together, “
Related Persons
”), hereby
releases and forever discharges the Plaintiffs (individually, a “
Releasee
” and collectively, “
Releasees
”) from any
and all claims, demands, proceedings, causes of action, and other liabilities
whatsoever, whether known or unknown, absolute or contingent, direct or indirect
or nominally or beneficially claimed or possessed, both at law and in equity,
which the Management or any of its respective Related Persons have against the
respective Releasees arising contemporaneously with or prior to the Closing Date
arising out of or related to the claims asserted in the Pending Litigation
(collectively, “
Liabilities
”).
The
Management hereby irrevocably covenants to refrain from, directly or indirectly,
asserting any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any Releasee, based upon any
matter purported to be released hereby. Notwithstanding the preceding, this
Release shall not operate, nor shall it be construed, to release the Buyer,
Seller or Plaintiffs from their respective duties and obligations arising out of
the Asset Purchase Agreement.
The
Management expressly acknowledges that it has received the advice of counsel
prior to signing this Release.
The
Management acknowledges that it may hereafter discover facts different from or
in addition to those it now knows or believes to be true with respect to the
matters released herein. The Management acknowledges that the releases contained
herein shall remain effective in all respects notwithstanding such different or
additional facts.
If any
provision of this Release is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Release will remain in full
force and effect. Any provision of this Release held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid or unenforceable.
This
Release may not be changed except in a writing signed by the person(s) against
whose interest such change shall operate. This Release shall be governed by and
construed under the laws of the State of Florida without regard to principles of
conflicts of law.
All words
used in this Release will be construed to be of such gender or number as the
circumstances require.
IN
WITNESS WHEREOF, the Seller has executed and delivered this Release as of this
___ day of ________, 2008.
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John
Van Zyll
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Ann
Furlong
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Marvin
Stacy
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EXHIBIT
I
[LETTERHEAD
OF HATFIELD & TEMPLE, P.C.]
_____________
__, 2008
Sofcon,
Limited
EIG
Venture Capital, Limited
EIG
Capital Investments, Limited
c/o Jan
Telander, President
EIG
Capital
Calle
Azucena 37
Torreblanca
del Sol
29640
Fuengirola, Spain
Attention:
Jan Telander
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Re:
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Settlement
Agreement and Asset Purchase Agreement is dated September __, 2008 by and
among Diversified Product Inspections, LLC, a Tennessee limited liability
company (the “Buyer”), Diversified Product Inspections, Inc., a Florida
corporation (the “Seller”), John Van Zyll, Ann Furlong, and Marvin Stacy
(collectively, the “Management”) and Sofcon, Limited, a Belize
corporation, EIG Venture Capital, Limited, a Belize corporation, and EIG
Capital Investments, Limited, a Belize corporation (collectively, the
“Plaintiffs”) (the “Asset Purchase
Agreement”)
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Dear Mr.
Telander:
We have
acted as legal counsel to the Buyer, Seller and Management in connection with
the transactions described in the Asset Purchase Agreement, including all
Schedules and Exhibits attached thereto (the “
Transactions
”).
This opinion (the “
Opinion
”)
is being delivered pursuant to Paragraph 6(a)(v) of the Asset Purchase
Agreement. All capitalized terms that are used in this Opinion which are not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Asset Purchase Agreement.
In
connection with the delivery of this Opinion, we have examined the Asset
Purchase Agreement, including all Schedules and Exhibits attached thereto. We
have also examined the Articles of Incorporation, Bylaws, Stockholder Ledger,
issued options and Option Ledger, existing loan and security agreements,
settlement and dismissal documents relating to the Pending Litigation and
originals and/or copies of issued stock certificates of the Buyer and the
Seller, certificates of public officials, and other documents and records
provided to us by the Buyer, Seller and Management as well as such other
certificates and instruments as we have deemed necessary for the purposes of the
opinions expressed herein. As to various questions of fact material to this
Opinion, we have, when relevant facts were not independently established, relied
upon certificates and written statements of Management, Officers, and Directors
(as applicable) of Buyer and Seller. The aforementioned Asset Purchase
Agreement, including all Schedules and Exhibits attached thereto and all
documents, instruments and agreements by and among the Buyer, Seller, Management
and Plaintiffs relating to the Transactions are sometimes hereinafter
collectively referred in this Opinion to as the “
Transaction
Documents
”. We are familiar with the proceedings of the Buyer, the
Seller and the Management with respect to the authorization, execution and
delivery of the Transaction Documents and the transactions contemplated
thereby.
Based on
the foregoing and our examination of such matters of law as we have deemed
necessary or appropriate to render the opinions set forth in this letter, but
subject to the qualifications and limitations described, we are of the opinion
that:
1.
Seller is a corporation duly organized and legally existing under the laws of
the State of Florida and is in good standing and qualified to conduct business
in the States of Florida, Tennessee and in all other jurisdictions in which
Seller is required to qualify to conduct business. Seller has the requisite
corporate power and authority to carry on its business operations and to
transfer its assets and properties.
2.
Buyer is a limited liability company duly organized and legally existing under
the laws of the State of Tennessee and is in good standing and qualified to
conduct business in the State of Tennessee and in all other jurisdictions in
which Buyer is required to qualify to conduct business. Buyer has the requisite
limited liability company power and authority to carry on its business
operations and to own its assets and properties.
3.
The Transaction Documents and all Schedules and Exhibits, and all other
documents, agreements, or instruments executed or to be executed by Buyer,
Seller and/or Management in connection with or pursuant to the Transaction
Documents and the consummation of all of the transactions provided for in the
Transaction Documents: (i) have been duly authorized by all necessary limited
liability company action on the part of Buyer and its members and managers; (ii)
have been duly authorized by all necessary corporate action on the part of
Seller and its stockholders and directors (including filing a Proxy describing
the transactions described in the Transaction Documents with the SEC and
transmitting the Proxy to the Seller’s shareholders and allowing the Seller’s
shareholders to vote on the aforementioned transactions at a duly called meeting
of the Seller’s shareholders); (iii) have been duly and legally executed and
delivered by Buyer, Seller and Management; and (iv) Buyer, Seller and Management
have the requisite power and authority to enter into, execute and deliver the
Transaction Documents and to carry out all of their obligations
thereunder.
4.
The Transaction Documents, executed by Buyer, Seller and Management, constitute
legal, valid, and binding obligations of Buyer, Seller and Management and are
enforceable against Buyer, Seller and Management in accordance with their
terms.
5.
To the best of our knowledge, based upon due inquiry with the Buyer, Seller and
Management and necessary legal investigation, no authorization, approval,
consent, declaration or finding of any person, entity or governmental authority,
regulatory body, federal, state, or local, is necessary or required in
connection with the execution, delivery and performance of the Transaction
Documents by Buyer, Seller or Management, except for authorizations obtained by
the Buyer, Seller and/or Management prior to or at the time of
Closing.
6.
To the best of our knowledge, based upon due inquiry with Buyer, Seller and
Management and necessary legal investigation: (i) the Purchased Management Stock
being assigned to Plaintiffs by Management pursuant to the Asset Purchase
Agreement is free and clear of any and all Liens, claims, Security Interests
and/or Encumbrances, and there are no liens, claims, Security Interests, UCC-1
financing statements, or similar filings or encumbrances or potential liens,
claims or encumbrances on the Purchased Management Stock being assigned to
Plaintiffs; (ii) following the execution of the Transaction Documents,
Plaintiffs shall acquire good and marketable title in and to the Purchased
Management Stock, free and clear of any and all Liens, claims, security
interests, and/or Encumbrances of any kind; and (iii) each of the members of
Management (in each case, where applicable) have full authority to: (a) sell and
transfer the Purchased Management Stock to Plaintiffs, free and clear of any and
all Liens, claims, Security Interests and Encumbrances which might be asserted
by third parties, and (b) enter into, execute and deliver the Transaction
Documents and bind Buyer, Seller and Management in accordance with the terms of
said documents.
7.
As of the Closing, the Seller will be a shell company with no operations and no
Liabilities, Liens, Litigation, encumbrances or Indebtedness that is up to date
in its filings and in compliance with all applicable federal and state
securities laws and regulations and its common stock will be traded on the
Over-the-Counter Bulletin Board.
8.
Following the Plaintiff’s acquisition of the Purchased Management Stock, the
Plaintiffs will own and control a majority of the Seller’s common stock and in
accordance with the Seller’s Articles and Bylaws, the Plaintiff will have voting
control and the right to control the operations and actions of the
Seller.
9.
To the best of our knowledge, based upon due inquiry with Buyer, Seller and
Management and necessary legal investigation, there are no judgments outstanding
against Buyer, Seller and/or Management and there is no pending or threatened
action, suit or proceeding before any court or any governmental or regulatory
authority relating to Buyer, Seller, Management or the Purchased Management
Stock, where such judgment or pending or threatened suit or action or proceeding
would adversely affect Buyer, Seller, Management, the Purchased Management Stock
or the ability of Management to transfer the Purchased Management Stock to
Plaintiffs, free and clear of any and all Liens, claims, security interests and
Encumbrances of any kind.
10.
As to compliance with federal and state securities laws and regulations:
(i) Seller is current in its filings and in compliance with all applicable
federal and state securities laws and regulations; (ii) the consummation of the
Transactions will not negatively impact Seller’s ability to continue as a fully
reporting Over-the-Counter Bulletin Board company following the Closing; and
(iii) the consummation of the Transactions is fair to Seller’s shareholders and
has been approved and consummated by Seller’s shareholders in accordance with
all applicable state and federal securities regulations.
The
opinions set forth in this letter are qualified as stated and are qualified
further by the following:
a.
We have assumed the competency and legal capacity of the signatories to the
Transaction Documents and all underlying related documents and the accuracy and
completeness of all records made available to us.
b.
Whenever our Opinion, with respect to the existence or absence of facts, is
qualified by the phrase “to our knowledge” or a phrase of similar import, it
indicates that, during the course of our representation of Buyer, Seller and
Management in connection with the Transactions contemplated by the Transaction
Documents, no information has come to our attention which would give us current
actual knowledge of the existence or absence of such facts. However, except to
the extent expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts, and no
inference as to our knowledge of the existence or absence of such facts should
be drawn from the fact of our representation of Buyer, Seller and/or
Management.
Very
truly yours,
HATFIELD
& TEMPLE, P.C.
ANNEX B